AZPN - Earnings call transcript Q3 2024

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Operator

Good day and thank you for standing by. Welcome to the Q3 Fiscal 2024 Aspen Technology Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Brian Denyeau from ICR.

Brian Denyeau

Great. Josh. you, Thank and our everyone, fiscal for us joining ending Good results thank for discuss financial XX, of the to March afternoon, XXXX. you third XXXX quarter the AspenTech's Interim AspenTech's on With Antonio CFO. today and Stagno, CEO; Pietri, me Chris President call and are we in we and conjunction call. posted with IR have refer investors note, earnings presentation today's that Please our to on an website, ask this presentation

filings to include take make our the that Starting of statements. a and this these obligation forward-looking new to update that statements are on this made on today, would Any no in to in on press materially Slide differ statements that will X. annual could other set differ these with remind contemplated and forward-looking on today's our may SEC. remarks results assumptions release like we report today are Form those call by information forward-looking I events. Actual you cause as based from statements. XX-K to undertake forth opportunity or materially as future results of we these Factors subsequent result and

is press reconciliation of GAAP During financial in A non-GAAP present non-GAAP available on of are included which website. release earnings measures this GAAP Relations both and today's and measures. investor to both presentation, will we certain presentation, Investor our

over Antonio? Antonio. the to With that, me call turn let

Antonio Pietri

welcome and Brian, to Thanks, today. everyone us joining

first and highlight and new pleased like the held last Before in For a event, see flagship we I was of week with faces get the Texas AspenTech attendance. an to many user to This our Houston, theme conference, Future. that has into would I new were we OPTIMIZE the in familiar results, OPTIMIZE organization which held our time Partnering

transformation Dual meeting requires core, sustainability also with organization resiliency growing future. and are Challenge leading investment of a will than through and AspenTech the in meet our increasing to the opportunity representative At increasing performance, for sustainability that conference resources on its and We at attendance the a require this the an imperative. of while addressing believe digitalization to customers a are the the available population from the held demand of customer in ever, heavy objectives. standard addressing More focused discussions living new the technologies strong

QX meet turning for reflect Now reflected seeing to of the as us. the opportunity healthy remain That or excited opportunity volume the the in and Slide pipeline. market our ongoing X about expectations We our the business incredibly results. of closed did available not in to our said, quarter growth we're

Annual QX. in was a contract deployments agreement customers growth The we value, the or sales organization. Free million new flow by what to slow ACV, on and lesser our maturing ACV included and I in believe the of had renewal driven quarter in in was to a fiscal budget by the and lower-than-expected our secondarily, year; degree, $XXX million much quarter-over-quarter their was QX, earnings X.X% year-over-year X.X% that cash referenced closing was prior QX $XXX increasing call. and delayed start

caution extend on opportunities last the the waned customers We while purchasing close ultimately, value-creation more the closing and month. On exercise throughout final customer saw side, in quarter in in business as quarter engaged time remained the discussions, the conviction to their lines quarter customers decisions. exciting beyond

context regions uncertainty by believe of evaluate this the quarter. to and customers' in most markets the the budgetary environment. markets end across for their need We prevalent were additional created and end allocations reflected dynamic dynamics macro a These time in own

strength we're exhibited of their pipeline. also calendar that That XXXX, said, generally customers consistent that seeing those continue to are our budgets in and communicate with

to meet and control to We drive closely within everything sales doing dynamic to decision-making are continue monitor faster our goals. this our

instances some and our saw continue sales our where best sales to institutionalize expanded was the team as side, below onboard practices. self-execution we we our expectations On

put sales we of XX significant Over sales months, place portion created missed We in past a the customer cautious adjusted sales new spending XX in and for base. leadership, believe of expanded sales to environment QX. our still coverage combination the team a opportunities a have maturing team our and some more overall

We best long-term our remain organization to confident to our will us capitalize the investments and opportunity. on sales changes made growth position fully

can we ourselves control. the caution organization and term, to working as and customers, the drive that self-execution high-performance we a to end, address in return that things can among spending global control near we To we alignment our While our cannot are actively those predictability level organization. sales that full of across we expect

ACV Considering our least X.X% our We in flow to updating to his cash when mainly this ACV lowering considering QX softer free dynamic our in at also we new XXXX which performance, target at XXXX. year least a is on QX. in guide saw color more our will Chris financials year QX. growth outlook the the fiscal fiscal prudent provide net $XXX We're function we believe of in are remarks. million, is

several said, customers continued with in win now our in expand fiscal to in suites' XXXX. existing an expectations saw Slide as suite performances updated I to will on wins as This and QX that DGM. or continue year license turn well as logos. for new update With provide demand X QX with Starting signed strength our term to Management we share wallet Grid and Digital

we the optimization example, beating for deal security distribution performance. North all large including in a quarter, evaluation management America, won technology, across and nearly categories, compliance, competition the During and

security to global and suite. prioritization as of excited pipeline be modernize the energy markets. of an unprecedented Overall, innovation the to international and strong investment both grid and for tailwinds the update DGM funding these The combination in United drive our grid. States of is technology a strong helping remains this drives term of growth electrification we the for acceleration our and cycle prospects strength continue and outlook for Demand grid to the about

materially process than procurement longer different have customer in our mentioned we've segments. as utility other Separately, the and past, customers a

We these year-to-date are with deals. process continue growth in points considering sales performance, progress X.X with of we on and XXXX. for strengthening DGM's this to our the area, track remains it characteristics year fiscal forecasting our Overall, refining approximately associated and make in deliver to purchasing pleased

SSE, close that softer deals of Engineering, growth. factors the the the and in backdrop, of This QX, for quarter. X quarter had at this or contracts renewal. these Science had SSE and out with out In block more a the Subsurface many resulted We expect to of top largest its deals pushed call, now up muted of I laid combined quarter.

with converting operating the strength now strong national remainder more the CapEx year. existing of we for subsurface road in entire place our and for fiscal SSE the to for customer tokenization oil with a consideration, growth from Taking example, in solid our expect point the our further easily. innovation down of approximately budgets remains America. year seismic in in interest access portfolio all and Latin With significant that said, to SSE backdrop has we X SSE shown values technology the of calendar of company into our This this QX, customers XXXX. expanded business In

laid of across of all deals from X the through Slide significantly more significant our prior our slowdown over have accounts we the segment half. the sales sales of first was HVS Heritage performance one is well focused most HVS QX count Engineering the out marking quarter enterprise with our increased is SMB out or AspenTech. were notable. the prevalent This I the levels AspenTech the Turning pushed of head regarding which business X part quarters. drivers number regions, and the on is business the our of This past as saw as where in new a the in suite's to to high-velocity market organization, suite. a areas generating accelerated new larger where several

our that that QX, our continued the beneficiary continue energy said, a for markets In CapEx over will term. sustainability remain prime we example, the positive of With long traditional for engineering with world's suite we to both projects. firms outlook top and believe increasing to deals customer of the companies, E&C response EPC operators who owner in one the backlog win with sustainability and a sector to and is long-standing energy expanding in business their

suite, activity. benefited the a transaction of Manufacturing MSC. from in closing the QX & our Chain and MSC or sales to Turning In pickup QX, delayed Supply

released However, industry remains deals with were chemicals of quarter. Aspen in Unified saw in move we some headwind a did some The by prolonged more product committing still out the to refining in MSC, several cautious we recently downturn our QX. of it was see Nevertheless, buying while planning early the activity the area for quarter. we encouraged the customers where an also uptake

return on Looking when ahead, a a have refiners while to cautious will favorable continue outlook. we recovery remain chemicals

optimization product, chain continues area with process this in comprehensive GDOT product in Our supply and interest DMCX pipeline of dynamic multivariable control solution. business grow the to our multiunit optimization

or opportunities of where that attrition strategy this the expectations market growth real, provide We're there expected go-to-market future for material to investment below to fiscal not Finally, in with return APM, APM's deals as selling believe to clear expect a segments leadership combination Asset its the performed since higher Management, QX quarter. out and in fiscal is we targeted certain the do APM should better, these of full we're simplifying on and moved time. means in quantifiable. now are of position, attrition minimize risk We us of The it that is year contribute over taking more and Performance ACV several the XXXX. process

X.X results. Taking AspenTech we Heritage contribute these at least year ACV of all fiscal our expect account, for suite growth now XXXX factors into to points

which deeper VXX.X I product to of AI on R&D and remained XX.X X, product R&D Slide quarter. would an our update, include to to industrial our our provide integration updates our on across Version and this have plan portfolio will launch laser-focused software the and recently Aspen initiatives. platform, Unified more. On now launched release like teams we update

include planning release AVA, this Advisor, or example, an Unified and Aspen Aspen Virtual will scheduling. for As

We to analyzing technology. have the to planning and help and at XX.X, previously core Aspen for AI optimizing production Advisor plans. area. released AVA Version DMCX introducing our users process control leverages its algorithms multivariable we're AVA in guide scheduling In Virtual

other the as for Unified also Workflow our Aspen product We beta of new QX version solutions. shared a launched and in component

many the users ways across their the This Aspen achieve to third-party actions one for automation users and workflows greater of just to our orchestrate to and operating more workflow complex operational efficient ability we're highly Workflow outcomes. enhance environments. applications of working is AspenTech in allows

carbon and launch to Sustainability carbon solution Finally, that use capture, availability modeling guide asset By a limited our sustainability planners we're inputs generative combining the helps for for planning Pathways announce a integrated sustainability generate new leveraging and strategic in initial plans that solve optimization decision-making companies sequestration excited for AI different product, strategy to Sustainability problem, and recent unique and reduction. of to investments. planning strategic capabilities, aims blank-page to Pathways

Slide Turning some to focus to quarters. X. our I for color like on now the provide would coming areas key

and several the date. progress underway drive we complete in across to our making First, have We're better already initiatives sales alignment areas to teams. these onboarding

further we're to company efficiencies entire the going best-in-class drive cash path our Second, and and working productivity flow free across to forward. to profitability accelerate

focused multiyear and drive are are productivity. what we We control to believe several can there and expenses on improvements opportunities in controlling rationalize

the Third, space opportunity. we belief business business. in significant our areas into growth in its that strategically the continue continued will a our and targeted make special multiple includes focus given This to investments on of long-term important DGM tailwinds

the in reflect be our markets. QX changes long-term underlying that strongly our we're any performance potential the Finally, of nor material full I to the does end today want reflect it we clear does opportunities in of not feel seeing strength that

a gap as to center megatrends, well several with at Our with important system. while forces. and across labor are dealing do their the more energy to as same less skills transition At to a of working address electrification global the including the we customers remain demands new decarbonization time, growing

As leaders a remains challenges, portfolio software, to with these in customers perfectly help compelling spend industrial providing AspenTech. our outlook navigate situated future for

yield to necessary areas focus place achieve in to our both growth taking expanded will have that QX our steps objectives improvements see the able the are in position control now drive ACV combined force, beyond. We're in and across us improved and we are better we our conclusion, increased markets, time. within In sales most the to with multiple over that we tailwinds confident for end

like Before new the team. to would members the Chris, to I over to welcome I turn AspenTech X call

to a my with growth With our roles new First senior tenure forward support long-term looking David Chief Dave successful at is our Financial of in Emerson, Baker. partnership and objectives. I'm Officer, comes deep the acumen operational to long company with and financial in expertise financial armed Dave.

Thank for role he I months like for the done forward to trajectory. and in X maintain Chris. interim last also serving our thank to has everything would Chris the over you,

would software, long AspenTech's going wealth I to to accumulated successful us knowledge a like highly Henshall David we David. invaluable Over David Secondly, and as organization that has a experience of and to leadership Board welcome Directors. Welcome, of will forward. career in advance the prove

With that, up Q&A. our will results turn for it for it Chris financial I a to open Chris? we of review over before

Christopher Stagno

Thank you, everyone. Antonio, and hello,

I Turning to our highlighting presentation results. ASC that financial earnings will QX includes out our explanations Topic performance. start the impact our regarding by XXX on of

definitions with have our IR presentation annual bookings ACV, contract together We of that also definitions flow, these call. available other included our website. and metrics, refer on in or We among today's cash value, ask to free investors earnings now

value fiscal in was year-over-year X.X% X.X% million Annual up and Starting $XXX quarter on contract XXXX, third X. of the quarter-over-quarter. Slide

mentioned, the XX% million bookings XX% that out by Antonio under increasing prior third renewal large QX. pushed contract the ASC total the $XXX that of timing, $XXX this of million Topic were from majority while for closing bookings renewal included increasing our year-over-year. third was is the note heavily XXX. quarter, our revenue delayed year-over-year, in revenue and As while are Please recognized revenue impacted Total the quarter,

non-GAAP operating non-GAAP in of a reported operating operating was by focus a of non-GAAP income Now a driven million $XXX to operating This onetime XX.X% higher to turning efficiencies. continuing profile and a year-over-year compares profitability. improvement expense our and million $XX we license basis, addition of a margin QX, XX% driving in margin. non-GAAP to solutions The for revenue of margin mix On income mainly in ago. year a savings representing on

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

$X.XX $XXX mainly due or year leverage. operating of $XX the year-over-year a income increase income growth strong in ago. net The per million of between and the per net was was million share solid income compared quarter or Non-GAAP net non-GAAP periods $X.XX to non-GAAP in to revenue share combination

equivalents, repurchases balance to million cash with facility. $XXX of revolving cash We $XXX and sheet. ended reflecting quarter million repurchase credit share and impact our $XXX available approximately Turning million our under the our authorization the share of under

XXXX. million for for authorization shares of authorization quarter, under we million our repurchased of approximately the million $XX Year-to-date, in value year and million. generated approximately repurchased cash shares have $XX from ago. million flow we of a $XXX the During for $XXX X.X QX million from repurchase with in million million remaining we cash On XXX,XXX under $XXX share fiscal year in same cash million to a $XXX free operations total cash $XXX flow operations $XXX compared flow flows, free and cash flow

now Turning to Slide would I close X. guidance. like with to

to expect mentioned, XXXX. achieve in we ACV now at Antonio of fiscal As least X% growth

million fiscal XXXX $XXX for $XXX $X.XX with bookings billion renewal up total in up for and renewal million least QX. at expect We of in

revenue $X.X loss a of or billion, net million. net least flow at at $XXX of $XXX flow operating million. of cash perspective, and From income least $XX at non-GAAP than cash at expect better million expect we total cash and of least at GAAP least We flow million free $XXX

slides presentation IR guidance, our of our For overview complete fiscal XXXX earnings now refer to please website. our on updated year a available

performance and In we committed recognize has to performance that implementing the not forward. necessary expectations, closing, to are our going year-to-date improve we our met actions our

confident in have place several mentioned, different we us different As these are will areas. help we that address now initiatives Antonio

return progress flow cash Additionally, we generation. are and our profitability to best-in-class free steady toward making

to Antonio? the his back call Antonio remarks. for turn closing With that, I will

Antonio Pietri

Chris. Thanks,

fiscal earlier, year successful the quarter. QX broadly, note sustainably. to of More monitor guide assets our portfolio more As spending adjusted initiatives. confirm this forward positive we customers have we I measured help mentioned our ability to and focus for customers expansion our recent XXXX outcome. We execution and QX we its on out in fiscal following the response to ensure a run in our our remain We this and dynamics strength engage their with and on about faced year software a our look closing for a to plans actively expectations their with and efficiently excited

up open we'll that, questions. it With to Josh?

Operator

Celino question KeyBanc [Operator from Instructions] Our Capital Jason first with comes Markets.

Jason Celino

at of it? I think is point everyone's especially start relative to of then particularly downtick? kind last And the question feel on quarter, for specifically business, mean where the minds the the to did kind quarter Heritage maybe what I in changed? what like was you

Antonio Pietri

drive the and started happen of the with March and we closing customers. week drive turn to started these like weeks conversations on our through especially process to quarter. to what beyond customers beginning the of reasons mean, things didn't into I to X be with maintain our last very start expected or we good of started to as second to engagement -- teams deals and the see Basically, March, approval the to extend Well, final the different we March

So came quarter, weeks X last I of it say mainly the down last X the weeks. the to would

As dynamics. saw based and, our lesser last materialize. the product broad of also comes the most was But in down driven suite, you was way, is across consistent we a know, it regions and it's impacted you business weeks it because where of DGM that, different to remarks, a know pushout my to in would extent comes very What said say all -- our of quarter, by our as and to most about of I the this X well as -- I surprising.

Jason Celino

and at implied look kind And is looks with the I basis. year for we just when QX last saw increase usually, change then on we consistent -- of of sequential guidance, growth like what the it a the QX on a kind between ACV, when Okay. QX about like think

So we of there quarter? you say next be this like Anything deals I'm that in there? aware what's conservatism I feel quarter is guess what of should good baked didn't closing a on kind maybe about Like asking from close is can anything but standpoint. you that

Antonio Pietri

January, Yes. said -- Well, let We QX call strong conviction me the look. fiscal had earnings February. the in year. in as at much We've a about early

a pipeline have business. very We strong of

regions across specific very a pipeline. is some very on the we're customers interesting our of set of customers deals deals they have confirmed confirming in have and because we based are budget that a guide is believe their with not are with but very where in we QX to specific only place our have conversations spend. We -- having and we budgets around all intent

think we need spend. differentiate I to and intent to between budget And

I pushed to was out. place, got intent saw what in think is QX in spend we budget the but

those And so on guidance guiding of many is -- conversations and our conversations at reflects QX were and with based week, engagement what and customers. There is an OPTIMIZE we're had outlook last our pipeline. analysis to

our area here, something that the of top-to-bottom will sales that directors. leaders, done and and happen I we already That's that sales before have personally again week area sales a every with as provided. sales our activity the happened OPTIMIZE, review frontline managers, one guidance of have such,

Operator

Obin next Andrew from with America. comes Our question of Bank

David Ridley-Lane

comments relative sales color year? Ridley-Lane how confidence just pipeline, confidence David that cycle, your but they Could for elongated this kind in around you in size, fiscal Andrew add just those Obin. on a those -- in little knowing developing is the of your This more that's had you closing had, DGM's

Antonio Pietri

XX% suite. we somewhere points for contribute points guide of points and you grew puts growth Last Look, the that growth we that that X.X will for year, suite X.X X. to X.X believe at range our grow around the the foremost, of approximately of growth DGM -- will year, told or DGM Sure. just XX%. DGM of first of Yes.

believe are do a or different So municipality, whether across These states. have dynamics we utilities, around we a government-owned, DGM. multiple it's state

upgrade So grid the need they are cybersecurity. to driven by the and expand

on our and pipeline So We've different motivations. When first continues their into expanded we Europe. to DGM. grow spend -- our has organization sales drivers

a that's into sales very an expansion that we a when regulations. the Asia now government we started cycle But a pipeline, Pacific because have go East. XX-month it's replace in to into XX- an customer rigorous system, that and process to existing Middle procurement and happens We tied

there, get X new the there's and once then deployed. Now cycle in that to to sales applications upgrades shorter, XX tends we're be months. And

commitment combination like will. cycle we're like upgrade making. continue like utilities behind shorter to thesis So sales a the our if upgrades the of And we'll the continued to grid. these the cycle We see. of is you benefit and and pipeline We that. investment of what sales add-ons, industry we all funds from longer We believe progress the that we deals and

happen sales America. team course, a business of into learning reset sales will, growth deliver to sales team We've a team Of to we we're did even in put in and around Europe. to in Asia new if and has these a AspenTech We're you put sales in institutionalization, the a do accustomed to. onboarding OSI North lot that how of teams, of that profitability we into Pacific. going There's quality the new

couple So excited follow. were But due sure procurement takes of that remain make very anything the customers those producing quarter. timing we people that but quarter expect. Nonetheless, was productivity more that QX, processes a to onboard good level about to a overall, we time and at into that's DGM business. DGM QX the deals the slipped There it for than of they're our these

David Ridley-Lane

XX-month view, fiscal Would -- your spend ACV that for fiscal will, a it fiscal additions? change year 'XX calendar on here And in June, significant you been follow-up, happen in to it. of most Got that, there's your a year-end for kind you given a you outlook versus the clients is look of But to are of have up. if 'XX. sort likely say in there's your lot as at budgets you flat more a a commentary of is

Antonio Pietri

but mean to sort it -- mean of to look Yes. then there's budgets here, intent and all is I I your think hairs important I question, one. spend. wrapped appreciate don't Look, there's I and -- split comment, that into

macro fluctuated indicators in margins, green. the oil little flashing sustainability, track, still at that the quarter, gas, have came between look and spend Refining $XX. down but those they're we are oil March in a and refining prices prices, all margins bit oil $XX solid. CapEx CapEx spend you around indicators If $XX, mean I

And United so going improve here the place in better in uncertainty customers margins around spending line chemical all States, customers for put why if in spend, understand to with they summer gas what whether in our in interest there to a deployed that Heritage are of results challenges quarter the electrification environment, posted, in gas in companies, lower in and to the is the lower are in we're margins better the green. now driven -- should lower refiners. budgets oil results in bit we that profitability CapEx season refining 'XX, in into our and else. has at you in anything And can was CapEx. And oil by now have prices is that so driving spending the and The more some support the the indicators in -- or perhaps companies, those you have are light oil believe look with that order HAT slowdown -- perhaps around And macro chemicals. do revenue, that rates our in I customers the even little to and a around cases think, intent continues AspenTech

QX is do CEO don't now that the quarter: into or sure a approval working strong it sponsor question if when surprise to we're including "Yes, is champions year? and our sponsors some with the of CFO rigorously Is go remainder okay, by approved or deal," CFO, it he What saw make on we're that the to that spending? do everyone, deals is, So to the -- in slowdown does because and to in some business it the willingness doing engage CEO We a going of for our champions temporary with and the of that. a says, up customers goes QX at sponsors. and very our champion know is got then and our we that then the rejected to level approvals that it

this So is dynamic. I think a different

I we healthy. to pullback reported are there. saw prices premeditated at what think our Frankly, March was But just spending. by think in or $XX the in on results for the $XX, as a equally -- are well need $XX budgets quarter, oil customers that certainly

Operator

comes Oliver with Our next Baird. question from Rob

Robert Oliver

everybody to issues on Appreciate but Two one for those in lot I of like enumerated well. guess is year. you coming some of the on hosting issues. previous first sales-related see Nice know the just you in Houston. here as half I guys the the questions. around the just panel me question, it the seems a back

you'll have to of straightened you been So are confident look be and FY you that 'XX, a the challenges, remains as you're what's question. kind sales And everything? had follow-up ahead out then sales that approaching at your still of what's FY done kickoff and fixed 'XX done, what I and

Antonio Pietri

-- was first-line for we've with they We've leaders opportunities the of of I the and after all, up Yes. them. then quarter my first mean sales. understand that group -- reviews, area one and Rob, around couple ended No, I with regional leaders opportunities actions appreciate and that the weeks of with set already our part couple right of And question. the ago also the conducted the specific leaders are and of very one a sales a see. objective of what come a challenges to put

not, their meeting body new you them giving with and read organization, them. telling including it a have or first in of are they're foremost, customers when are to the with ability lot language starts signals their the Of course, that when salespeople what them, affinity their customers own for

process help close because, but that people we deals back as deal regular company their what's XX, certainly this salespeople will QX that in selling lot that close the greater more learning, join are years. one, we coming also is of real. And us them we we a a believe accelerate people but will they been assurance need of and have of look, XX, experienced are of to in have our to for a I XX So the isn't have and company lot here the a something it it is on deploying opportunity think learning, understanding when experienced the also give that

So year partnering making rigorous looking that also to in happen quickly happens of and into approach accelerating before kickoff our the then and we're sales more the fiscal go We're needs possible this a we at mid-July specifically meeting as much around new all for and onboarding, more fiscal 'XX. as training the taking our that quarter deals. the reviewing -- and sure new

wait agreements that generate We sales we jewels until the that to activities. we're the what are most are to to us, negotiations the again, are important negotiating avoid order that to other in terms to our don't bring that support then the quality happen, elongation all meeting many when what we conditions profitability maintain business onboarding those drive to crown to high and of our the that deals, closure of including in has including kickoff want and

action plan very is I clear. think the

still to learning also have people think there's I are happen you the their some that way around alignment organization. needs when that new

people much the last The think QX. was that even facilitate some I But There's XX the we've to in put months. -- newer place onboarded XX, DGM QX So pretty of we're look, last working onboarding the also of got in QX, and in middle team for been people some here -- in year. months XX that. European

do, same is it that to working we just done. get page everyone and what I'm make This going we're get So forward. supposed the on we're to optimistic. But we'll sure

Robert Oliver

in Great. this I think we're follow-up, And a ways. at going different question quick all then just and

a nice job guys your I a little the at line. a you SSE, in DGM it's SSE business, the in But when repetitive. which and but essentially actually breakdown look So bit came out, did of businesses, forecasting called DGM weakness you although

it of have portion significant okay, that we're and deal, slide the in is -- [indiscernible]. of that So the said, had good reduction, the of thought, I If here. closed, a isolated actually hasn't in hey, bulk from We're that coming ACV was MSC closed, I that out a deck reduction, spot. pretty would just

even much So -- worse. got with things closing, deal but that

at the was sort hoping something but these you pretty dramatically I seems was think deals some get know guys signs? a here, of business amount significant the it in macro? in would amid that like through the Because which focused troubling So that that it kind just core, year, it midpoint changed clearly the more we're Or of of is best. your

Antonio Pietri

X, in I that of middle we've the a I is one the think have that of I starts with year Rob, on finish challenges fiscal always quarter. budget fiscal customers. the just then our appreciate January of year our it normally our second that mean, middle still year. fiscal a our July we the we're emphasized fiscal come for the for it's X, We while new question. And customers in

quarter the then new activity be I in we come think to fiscal targeted This is March we between year saw why good deploy our the meaning second into year, clear or wasn't need of to going at to and to loaded, also we the our very We and spend always new that QX was QX. but customers, differentiate for budgets spending. calendar quarter. And I fiscal back-end budgets said want their year. our and not be new to QX intent year half clearly customers that the

we February it's years, -- We how This of challenge positive. lays with case the caught in our been some a into be much expectations, -- to a some decisions going fiscal what's deals. that got here we is year is into And as our came earnings loaded. was So said have out. happening In call. always the back-end a great customers. this visibility spending early we I great I with surprise pipeline, great QX by think said by

Some that's been what happened years, years, it's a it's neutral. surprise. other the I think latter. time this And around, And been

Operator

William question comes Dylan from next Our with Blair. Becker

Dylan Becker

kind guys Aspen that show to was of of Emerson from pipeline time the I Antonio, Any week last fiscal were conversations of in maybe strength the kind confidence? year. being filtering conference of kind you calendar more double-clicking your that think first help of incremental the the takeaways on kind the kind approach. customer validate year and able and of it versus combined

that initiative. of that maybe intent-to-spend customer kind So help takeaways some support

Antonio Pietri

customers that the the Yes. of Well, look, they value the lined that. I challenges first all our about conference, AspenTech is from the all, feedback well incredibly see opportunity they mean, across have that how and proposition, incredible of the and strategy, up

also really a it deals. was great meetings existing to develop, customer see. Look, specific So was moment around relationships, new extending of and had high, that relationships we also just and great

X,XXX, happened, at had If X,XXX customers. you to we close look what

Monday, It which see on creation chemicals, industries, capabilities, great to XXX. we Heritage that We our interested of plenary, the was to opportunity of We our customers optimization whether applicability DGM DGM enhance from feedback. utility it's industries refining, was plenary. We artificial mining. standing-room-only a their of happened customers a there about due into We in for take people. capabilities had from XXX their feedback believe from some sight control them to have our to solutions to other in value the standing-room-only understand got solutions industries, capabilities, was great refining, Part for got plenary. the our seats grid. and Our on our the a into resiliency intelligence AspenTech DGM got to chemicals, about

the that had, the customers time. one of some at were that If there of feedback same points look of so they because that the that to is wanted also stations at our frustrated sessions were we we were happening many you received attend that main

attend us relevant facing. inside are next So are that can of that AspenTech they to of technology so And extend now to and to were that opportunities find conference asking sessions. more way time wealth they exists so that the the customers these the just this a to challenges speaks

I I moment to my of look, as that said And the never our QX. came in about statement. presentation, as that this and about "I've conference work in am encounter excited think we convinced the these feeling company we through I So been plenary more of have even way future it today." out I

move on. of a to finish place have Middle only the and expanding now some we certainly up We sales have in East. And we sales have the into transformation we're team in that now working it to Asia place, DGM initiatives because in that we're

certainly, this this a future been and company. the I have absolutely expected solidifying the than trajectory but team, see bump the traditionally the But sales doesn't in excellent more of making only to whatsoever. are our going in as has challenging see at we execution can I a on year expected, than performing We that I forward, road change sure the focus on level performed it's just AspenTech. And positive we going that

Dylan Becker

know out Got sticking That's expense kind well, it. as productivity I to opportunity internally, very realize and helpful. the the you the of Maybe management gains. guys as rationalize too. of you called think side about equation

wonder that Emerson cost already well. integration. the You're structure how broader the kind guess now realized kind a where haven't as thinking about be sales but sales I shift. the maybe X you're most of of know years kind structural that what's that opportunities readily of and I seeing been into I will efficiency, more or apparent long-term and there component of

Antonio Pietri

on small opportunities and I we now continue and look, to you X drive will productivity. Inmation, the on Well, you as the efficiencies the X one, prepared companies streamline efficiencies one a you it I When we're is be as to and working coming simplify, said think of we'll there that organization. and really together, opportunities have we're always big -- already work here certainly, remarks, mean, in

including want sort you noncompensation best-in-class So onetime focus less and that company, always we're have will we're continue been very -- be North drive. From profitability building to and efficiencies -- we're productivity my expenses, part because always it's focused that and the much of to driving of here do the there's culture on as a if expenses, standpoint, Star. to more which you with a -- on that. And

by You really productivity. driving on X that level a count get binary with less cannot X. doing it's journey multiyear It's to just head maximum you more -- because and profitability a to to not

As you fitter you drive get improvements and and fitter. muscles, exercise your

why the we maintained productivity given expanding drive But we're years credit I expenses that things the we that spending was my profitability flat less, going that's journey is it then to productivity, want I of we of possible. flow for in early get and X was and one increases drove in as forward. I incredible and phases multiyear AspenTech this that believe you this which to. cash free company, grow profitability. in for a you So said can know And when in starts the to tenure

So here as well in the new AspenTech.

in focusing on rigorously. optimize ourselves our build in -- soon. that more much pretty we'll meantime, sure be here our we'll muscle. right we're all So And find I'm place the And we'll sales to the going

Operator

comes with question Sandler. next Jeffries Piper Our from Clarke

Clarke Jeffries

when follow-up. be of retention Antonio, I you around in the to, final one Is attrition But expansion you versus than Then really I the think or still applicable the And around presentation, of wanted put Is as the explicit. ACV? think about final trending lot in later I budget decision versus I that the I that is commentary no a you've primarily expected? these piece really the I of more description intent. decision number shaped number X% have but want deals think spending lost around else. rough part are discussion think, to of to anything this

Antonio Pietri

with is about our -- point. with No, we the No, of X what attrition attrition. in look, year, our for points guided great line

QX. It's course, this in had Of produced renew now we've a that bump deal of That large didn't big QX. in attrition.

in Excluding closed now deal, deal. is our because that attrition we've line that

percentage, are quarter, you E&C net-neutral engineering the of dynamic number lot their of with well. Look, of where -- spending in have they expanding largest a is one was sizable got the We expanded will. the while fine, business have customers our pushed already which incremental in that deal So in deal, believe we spend of a as is a of good AspenTech. interesting our AspenTech. But a quarter, QX with transactions an especially attrition of E&Cs sight attrition and an context because we by their out the no, with signed very if AspenTech they spend the it's into number

seeing are the and same across E&C. this more behavior more We --

issue a So by I is don't customers. investment these think CapEx-related because it's long-term CapEx a

deals short-term APM. impacts on a in and pullback on spending is engineering MSC temporary that this think OpEx and I

we The pullback spend. area saw a in they renewal, pandemic order up very is the to the that seen dynamic OpEx, deals very come have that on signed, And we've maintenance that typical for you on already saw those if being discretionary spending. dynamic APM we that up during of in been agreements even give that save those if in also have of customers

quarter. overall, but a have clearly pullback on combination also the of So spending indicators support that we in what macro, the the positive, green it's that was behavior flashing a

Clarke Jeffries

Perfect.

helpful. that's being impacts to -- to really frame And some think I the you see think very point of I time these closing of sort times. on started last about March being where just the this

helpful. last we up across month, Just into wake sort ACV you are frame May, seen any improvement, much OPTIMIZE? amount of April if the where in of any and all can And reminder that of as around you terms how maybe segments, the there would give incredibly in us be you of in have the definable especially the business closes is

Antonio Pietri

in of last good month A the ever tied business in probably to QX like some company around say, in also That's can quarter. from sales that -- and XX% I'll that QX. somewhere the most has Well, of I'll pursuing. deals just XX%, cycles the most or you want to I software month. how mean, the out our work. And out any numbers future. in lot company, pushed didn't is pushed into and okay? just in of in you pipeline. the the regard the And and the it customer QX already the And it the to QX software say of the some It deal that QX disappear that a give in off look, that a those QX. of is a also falls business business we've were in of this business typical gets closing do is we're But April ask -- pipeline a what business we that commentary, deals into closes they'll hardly month, business our last of that But QX there's moved of closed

Operator

from comes Loop Capital Markets. next Schappel Our question Mark with

Mark Schappel

you have bit what you the on remarks, noted and could reviewing And were a prepared of your just segment you're a APM segment's around there. but in you may result this your touched details wondering question, you I that prior the as segment the if In doing additional some was little underperformance in quarter. your provide APM

Antonio Pietri

Yes, business, especially that yes. product, is fact Look, our APM Mark, our product. is Mtell the great a

world, or a receive. conferences. Mtell X every Mtell IoT, little think Processing, award awards in of has I AI, products as by the of by region best Frankly, given X the almost has been that it's Hydrocarbon since best technology I mean very beginning. gotten our bit incredible, technology whatever, recognition a the

happened with has that proposition the attrition for segments incredibly lot very a those value to see is okay, customer some Mtell Mtell little and segments. we're seeing So clearly customer extent quantifiable What in material that in APM. to -- we the is clear, and

deployed technology buy and the expanded. customers these So

So incredible the with mention I'm not sites going what segments I'm to have listening. probably competition customer value. across some sure is technology we -- because customers already And XX, generating the XX

a customers or segments some time, implement their buy. later, So reason, -- and promoted, attrition. use technology. generates hasn't company, to quantified. the the really have but at teams the and sustaining the the isn't a what year get the They it. on, move commitment same leave whatever customer for value And either been They we technology. there of X where And is therefore, proven That love

they've is the there's growth. some never negated quarter, an fact amount attrition. is generating then growth, gross and every generated growth important that Mtell by that APM, new that The gets of So product, stop

done, outcome more will in, review been the a this material see I've therefore, into a customer with to successful where overall and in the our reviews we focus growth be with we we contributor Mtell and we will will the and our segments attrition. that it's as very product, go that growth where is be net sharpen involved APM, if And company. little very can that part So some the of of we've clearly

tell pursue but we're not business sake be to doesn't We're So the business We're we to And focused, going of of have for customer those in going the going by using to that's that love we're attrition a those 'XX, going some doing. believe we becoming the it to are fiscal what believe Mtell customer -- And strategy. we with high-quality business very for technology. I segments. leader and you we're later sharpen customers on. generate that of just can number already far. segments our we're

Operator

Antonio over remarks. turn Pietri the for to closing like now back to would any I call

Antonio Pietri

joining you today. right. Thank everyone to you, thank All Josh, call for and the

Conference attending June. in be the Baird Technology and Growth Conference We week the William first will the of Blair

out many these look information our soon. Relations events. more you Investor with So catching We please team reach to forward on of for to up

you, will see And road. thank we for joining. on So everyone, the you Thanks.

Operator

you for Thank your you. Thank the This concludes participation. conference.

now may You disconnect.

Aspen Technology (AZPN) 7 May 242024 Q3 Earnings call transcript