Aspen Technology, Inc.
Q1 2023 Earnings Call Transcript

Published: 26 Oct 2022

[Operator:]

Good day and thank you for standing by. Welcome to the Fiscal First Quarter 2023 AspenTech Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [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 of ICR. You are now able to talk.

[Brian Denyeau:]

Thank you, Justin. Good afternoon, everyone, and thank you for joining us to discuss our financial results for the first quarter of fiscal 2023, ending September 30, 2022. With me on the call today are Antonio Pietri, AspenTech's President and CEO; and Chantelle Breithaupt, AspenTech's CFO. Before we begin, I will make the safe harbor statement that during the course of this call, we may make projections or other forward-looking statements about the financial performance of the company that may involve risks and uncertainties. The company's actual results may differ materially from such projections or statements. Factors that might cause such differences include, but are not limited to, those discussed in today's call as well as those contained in our most recently filed Form 10-K with the SEC. Also, please note that the following information relates to our current business conditions and our outlook as of today, October 26, 2022. Consistent with our prior practice, we expressly disclaim any obligation to update this information. Please also note that we have posted a financial update presentation on the Investor Relations section of our website. The structure of today's call will be as follows

[Antonio Pietri:]

Thanks Brian, and thanks to all of you for joining us today. Our first fiscal quarter performance was in line with our expectations. This was an important quarter since the completion of the Emerson transaction. [Technical Difficulty] business currently on the steps of the performance on OSI and SSE businesses. We entered the fiscal year with a clear focus to execute on our integration plan after the 7.5 months of [Technical Difficulty] completed before the close of the transaction on May 16. During the quarter, we validated many of our expectations from the integration planning phase, but also learn of additional process improvements and potential synergies. We also put new processes and systems in place to support the transformation efforts that will deliver the significant growth and profitability expectations we have for the business in the coming quarters and years. Some of these include successfully validated the token licensing model and designing the suite for SSE, which was released last week for Windows. The strong release time line was achieved through the focus effort by our software development and product management teams. The SSE suite has quickly been embraced by customers that we have engaged with in these discussions. This is the first step in the transformation of the SSE business and a clear demonstration of the learnings and expertise gains from our own transformation in the 2009 to 2014 period. As we have experienced, when heritage AspenTech introduced the token licensing model for the engineering and MSC suites, customers quickly recognize that by providing the entire portfolio of products in a single suite, it is much easier to try new products and accelerate adoption under a token licensing model. We expect the latest version of the ASPEN-1 SSE suite to be released in the near future as the final component of the tokenization of the SSE product portfolio. Second, we began the process of migrating the DGM or dealer grid management product portfolio to a term contract structure with the ultimate objective being the introduction of the token licensing model and DGM Suite, which is expected to happen in the second half of this fiscal year. As a reminder, the DGM product portfolio has been historically a perpetual license business. So there is a significant transition for existing customers that needs to occur to get them onto the token licensing model while we will live with the suite and tokens when engaging new customers. The introduction of the DGM suite will also enable the cross-selling opportunity of DGM products into heritage AspenTech market where customers are accustomed to this licensing model. Third, we have signed and been awarded multiple commercial agreements for DGM products that will be implemented solely by third parties to demonstrate separability of software licenses and services. Achieving separability will result in an earlier inclusion of software licenses to ACV. Today, software licenses in the DGM business are recognized on a percent of completion basis during projects since these are considered bundled. Therefore, DGM transactions are currently not included in ACV when signed. We aim to achieve this separability within the second half of fiscal year 2023. Fourth, we have successfully onboarded and aligned the sales teams from OSI and SSE, including establishing a common sales and forecast methodology, refining territories and accounts ownership standardizing quota and commission structure and establishing cross-sell procedures. Ensuring alignment across the sales organization and the entire company is critical, and we're pleased with how we have come together throughout the first quarter. And last, we have established a commercial organization that will support Emerson's go-to-market teams in the varied territories identified for them to resell our products. Emerson has also established [indiscernible] with AspenTech product quarters that will be compensated for Siemens. Overall, we cannot be more pleased with the progress made in the partnership. In regards to the synergies expected from the transaction, we expect to deliver synergies in four areas

[Chantelle Breithaupt:]

Thank you, Antonio. I will now review our financial results for the first quarter of fiscal 2023. As a reminder, these results are being reported under Topic 606, which has a material impact on both the timing and method of our revenue recognition for our term license contracts. Our license revenue is heavily impacted by the timing of booking and more specifically renewal booking. A decrease or increase in bookings between fiscal periods resulting from a change in the amount of term license contracts up for renewal is not an indicator of the health or growth of our business. The timing of renewals is not linear between quarters or fiscal years and this nonlinearity will have a significant impact on the timing of our revenue. As a reminder, we have transitioned from annual spend to ACV, annual contract value, as our primary growth metric. We define ACV as an estimate of the annual value of our portfolio of term license and term and perpetual software maintenance and support or SMS agreement. ACV provides insight into our annual growth and retention of our recurring revenue base, which is the majority of our overall revenue as well as recurring cash flow. Annual contract value was $809.6 million in the first quarter of fiscal 2023, up 7.7% year-over-year. This includes approximately $2.7 million of contribution from the recently acquired business of inmation. Please also note that we booked a $1.7 million reduction in ACV during this quarter due to a Russia sanction related write off. As Antonio mentioned, while we work through the transition of the DGM portfolio to term licenses, orders from this business are not included in ACV when signed due to the lack of separability from the AspenTech provided services. We expect DGM to contribute more meaningfully to ACV in the second half of this fiscal year after we achieve separability. Annual spend for heritage AspenTech, which the company defines as the annualized value of all term license and maintenance contracts at the end of the quarter for the businesses other than OSI and SSE was approximately $682.3 million at the end of the first quarter of fiscal 2023, which increased 8.3% compared to the first quarter of fiscal 2022 and 1.2% subsequently. This includes approximately $1.6 million of contribution from inmation. As a reminder, we intend to provide this disclosure on annual spend for heritage AspenTech only for fiscal 2023 to provide investors comparability with our historical disclosures. Total bookings, which we define as the total value of customer term license and perpetual SMS contract signs in the current period left the value of term license and perpetual SMS contract signed in the current period, but where the initial licenses are not yet being delivered under Topic 606. Plus term license and perpetual SMS contracts signed in the previous period for which the initial licenses are deem delivered in the current period was $224 million, a 43% increase year-over-year. Total revenue was $250.8 million for the first quarter. As a reminder, as a result of the Emerson transaction, the subsidiary that included the DGM and SSE businesses became the surviving entity. As a result, the year ago comparisons you see in our financial statements only include DGM and SSE in the first quarter of fiscal 2022, and year-over-year comparisons are not meaningful. Turning to profitability beginning on a GAAP basis. operating expenses for the quarter were $210.9 million. Total expenses including cost of revenue were $302 million. Operating loss was $51.2 million and net loss for a quarter was $11.2 million or $0.17 per share. The net loss reflects the non-cash expense recognized for the mark-to-market adjustment for an Australia dollar foreign currency derivative related to the announced Micromine acquisition. This will continue to fluctuate until the closing of the transaction. Turning to non-GAAP results, excluding the impact of stock-based compensation expense, amortization of the tangibles associated with acquisitions and acquisition related fees, and excluding the impact of the unrealized loss on the foreign currency derivative, we reported non-GAAP operating income for the first quarter of $92.6 million, representing a 36.9% non-GAAP operating margin. As a reminder, margins will fluctuate period to period due to the timing of customer renewals and therefore license revenue recognized during the quarter. Non-GAAP net income was $142 million or $2.20 per share based on 64.5 million shares outstanding. Turning to the balance sheet and cash flow. We ended the quarter with approximately $382.5 million of cash and cash equivalent and $270 million outstanding under our credit facility. During the quarter, we spend approximately $75 million for the acquisition of inmation. As Antonio highlighted. We are excited to bring inmation together with AspenTech and believe it is a great example of the opportunity we have to expand our product portfolio and increase the value we deliver for customers via acquisitions. From a financial perspective, inmation is expected to be immaterial in fiscal 2023 from a revenue of profitability and ACV contribution perspective. In the first quarter, we generated $5.1 million of cash from operations and $10.7 million of free cash flow after taking into consideration the net impact of capital expenditures, capitalized software and excluding acquisition and integration planning related payments. As a reminder, the first quarter is typically our lowest cash flow quarter due primarily to the seasonality of cash collection. I would now like to close with guidance. We have gotten off to a strong start in fiscal 2023 and we see positive underlying demand trends across the business. Our outlook for fiscal 2023 reflects these trends while also considering a wider range of potential outcomes to reflect the growing uncertainty in the economy. And finish with the progress that we have made on our integration initiatives during the quarter. We believe we are well positioned for the long term from a growth and profitability perspective and our ability to realize the $110 million of adjusted EBITDA synergy by 2026. With respect to ACV, we are maintaining a target of 10.5% to 13.5% growth for the year, including four points of growth contribution from the DGM and SSE product portfolios. The spending environment remains favorable overall and we believe we on track to drive greater contribution from the DGM and SSE portfolios in the second half of the year. We are maintaining our bookings in the range of $1.07 billion to $1.17 billion, which includes $547 million of contracts that are up for renewal in fiscal 2023. This includes approximately $111 million of contract up for renewal in the second quarter. We continue to expect revenue in the range of $1.14 billion to $1.2 billion. We expect license revenue in the range of $765 million to $826 million and maintenance revenue and service and other revenue of approximately $312 million and $64 million, respectively. From an expense perspective, we expect total GAAP expenses of $1.197 to $1.207 billion, but increased expense outlook is related to acquisition, integration planning, and amortization of purchase and tangible expenses associated with inmation acquisition. Taking together, we expect GAAP operating loss in a range of $57 million to $5 million for fiscal 2023 with GAAP net loss in the range of $32.5 million to $22.5 million. We expect GAAP net loss per share to in the range of $0.49 to $0.34. From a non-GAAP perspective, we expect operating income of $503 million to $555 million and non-GAAP income per share in the range of $6.76 to $6.91. From a free cash flow perspective, we continue to expect free cash flow of $347 to $362 million. Our fiscal 2023 free cash flow guidance assumes cash tax payments in the range of $94 million to $104 million, which is unchanged. To wrap up, AspenTech is off to a strong start in fiscal 2023. We are successfully executing on our integration plan and have set the foundation to deliver on our near and long-term financial objectives. We believe we are uniquely positioned to create even greater value for our customers and shareholders over the long term and our keenly focused on maximizing the opportunity. With that operator, let’s begin with Q&A.

[Operator:]

And thank you. [Operator Instructions] And our first question comes from Matt Pfau from William Blair. Your line is now open.

[Antonio Pietri:]

Hi, Matt.

[Matt Pfau:]

Hey. Hey, Antonio. Thanks for taking my questions, guys. Appreciate it. You wanted to ask, appreciate that you left the guidance ranges the same for your key metrics to account for a range of macro outcomes. But with another quarter of data points and conversations with customers, do you feel any differently about the probability of the low end versus the high end there?

[Antonio Pietri:]

Oh, let me look at like we said in our prepared remarks, Matt, today, we see a solid micro environment out there for our customers or prices have remained in a very good range for these customers. The industry continues to execute on what our CapEx budgets resulting from investment approved for them by local governments and other type of entities. And as we said, it’s only chemicals, especially European companies where we’re seeing at degradation of the performance around revenue growth and margin. But we’ve also seen that sort of situation before where these customers also decide to invest more on technology to drive greater efficiencies to try to overcome the marketing degradation. So overall, today, we feel like the macro environment has remained and will remain through the remainder of this calendar year. And so far what we’ve heard anecdotally is that budgets will still be solid for calendar year 2023. The refining industry, if anything continues to improve their performance, if you look at the results announced by some of the independent refiners here in the U.S., incredible results. So overall, we’ve been good about the outlook as of today.

[Matt Pfau:]

And then on the increased focused on energy security and your expectation to benefit from that, is that something you’re already seeing play out in your business or is that something that will take some time to materialize? Thanks.

[Antonio Pietri:]

Yes, no, look, I think some of that is already playing out through a final investment decisions around some of the LNG facilities that are going to be built to increase LNG production and then export out of the U.S. into other parts of the world. If you follow Qatar as a country, they issue a significant or they signed significant agreements with some of the major international oil companies for shared production agreements between their gas production as well, that all eventually flows through our customers starting with the EMCs and eventually facilities that are running that, then they will have a chance to optimize their operations and include their reliability. And eventually we also hope to be getting them excited about employing some of the microgrid technology capabilities from our side. So, overall, we just see a good environment and one that is driven by multiple factors that are benefiting that.

[Matt Pfau:]

Great. Thank you.

[Antonio Pietri:]

Yes, thank you, Matt.

[Operator:]

And thank you. And one moment for our next question, please. And our next question comes from Rob Oliver from Baird. Your line is now open.

[Antonio Pietri:]

Hi, Rob.

[Rob Oliver:]

Hi, Antonio. Hi, Chantelle. Thank you guys for taking my questions. I’m in a loud spot, so I want to put them both out there and then mute. So Antonio just following up on Matt’s question, just regarding the macro, appreciate your commentary. It sounds like the only change or modest change that from your prepared remarks was around chemicals where there’s some uncertainty there and you mentioned supply and demand issues and stuff like that. Can you talk a little bit about how that then is factored into that wide range of outcomes, meaning are you seeing strength in other areas that are potentially making up for that in driving the ACV? And then, the second question, which was my follow-up, was just around your comments relative to strength and upstream. Really interesting, and I think you alluded to a combo core Aspen SSE deal, if I heard that right, and I apologize because the audio wasn’t great for me. But if so, can you talk a little bit about that? Are those deals happening right now? What the pipeline looks for that and what the kind of increase in deal sizing opportunity looks versus what you saw for core Aspen? Thank you.

[Antonio Pietri:]

Yes, well, I mean, let me clarify as well regarding the first part of your question. Rob, I mean, chemical companies reported in their second calendar quarter results meaning the June quarter record profitability and record revenue. Now what we’re seeing here in the September quarter results that are coming down from that record profitability and record revenue to perhaps profitability more in line with their historical performance. But nonetheless, if not what it was back in June. So, while we’re keeping an eye on this our chemicals business performed well in our Q1 fiscal quarter. We – it’s a change and therefore we’re monitoring to see, we detect any behavior change from this customers. But so far, so good. Look, if there were to be a deterioration, if there’s one, it’s something that we have accounted for in that range, as you said. I mean, and what other puts and takes, well, you said it. We believe that the combination of AspenTech, heritage AspenTech engineering suite with SSEs subsurface times and engineering suite is a great, great new offering for our customers. Customers get excited about the potential to optimize their operations, both combining the subsurface and above surface facilities. And this is leading to not only great conversations, but a completely different perspective about the new AspenTech from these customers for the top relationship that they want to have with us going forward, which is changing the conversations completely. So we’re optimistic that the SSE business could have the potential for overperformance in fiscal 2023. It’s early days, but based on the conversations in this first quarter again, just as a degree of optimism.

[Rob Oliver:]

Great. Thank you guys very much.

[Antonio Pietri:]

Thank you, Rob.

[Operator:]

And thank you. And one moment for our next question. And our next question comes from Andrew Obin from Bank of America. Your line is now open.

[Andrew Obin:]

Hey guys. Good afternoon.

[Antonio Pietri:]

Hi, Andrew.

[Chantelle Breithaupt:]

Hi, Andrew.

[Andrew Obin:]

Just want to ask a question about the sort of the inmation acquisition because I think it’s actually very interesting, it goes to the heart of your working closer with Emerson, right? Because I think, I believe Emerson built their platform based on sort of data capabilities based on that, right? And you had a competing product and now you’re effectively taking over that sort of rationalizing, I think the two approaches. Can you just expand on that and just maybe talk about where you see more opportunities to sort of rationalize the approaches between the two companies in terms of technology? Thank you.

[Antonio Pietri:]

Yes, so, and Andrew, you’re exactly right. Emerson was an early investor in inmation. They invested in inmation in 2020. And you’re starting to see some of the benefits of the relationship between Emerson and Aspen Technology. Emerson highlighted to us – what they thought was a strength of inmation and why we should be interested in inmation. After doing diligence and doing our own assessment of the capabilities of inmation, we felt that their technology would be a step change in our capabilities. And now while we closed the transaction. What I can tell you though is and the rationale for why we thinking inmation is so important. And the fact is that over the last 12, 18 months as we’ve reengaged with customers in person more and more customers are telling us that was now they have all their data in these massive data lays that are being created by the cloud services companies. They have a real difficulty making sense of all this data related this data to each other. And therefore, they're asking for help in that regard. And this is exactly what inmation does. Inmation brings order to data, we contextualize the data. It creates data relationships. And as such, customers that deploy inmation will be able to then explore the latent value that exist in the data by using that data on in applications or other use cases, for example, with AspenTech applications capabilities, so we're very excited about this. It's going to become the cornerstone of our AIoT business. And now, well, now that AspenTech bounced in a way, Emerson has increased its investment in inmation because they own 55% of Aspen Technology by their name. The patients now in AspenTech, and this is now the two companies are going to be basically the data foundation for our customers going forward. The other areas where there will be opportunities, certainly in the control, advanced process control area, historian and other opportunities, but this is all areas that we still have to explore with Emerson. But this is going to be part of that commercial relationship that Emerson and AspenTech has established. That also has to be vetted by related public transactions were needed to mature that is properly done at an arm's length of that relationship. So we're very excited. And this is the first step in perhaps many of these types of relations going forward.

[Andrew Obin:]

Congratulations and thank you for a great answer. Thanks a lot.

[Antonio Pietri:]

Thank you.

[Operator:]

And thank you for your question. And one moment for our next question. And our next question comes from Jason Celino from KeyBanc Capital. Your line is now open.

[Antonio Pietri:]

Hi, Jason.

[Jason Celino:]

Hi, Antonio. Hi, Chantelle. Good afternoon. Maybe my first one, I understand that Q1 is typically a lower sequential growth quarter as been always like that. Maybe why did ACV and particularly, the heritage annual spend metric, it was kind of flat, decelerated just a hair, but anything to call out on that?

[Antonio Pietri:]

Let me give you an answer and then Chantelle can follow up. So just look at the two months of our lowest growth quarters, typically and that is the case. We're happy with our performance in Q1. Chantelle highlighted in his prepared remarks, that we had a transaction in Russia that we had to write-off because eventually didn't need the requirements under the tensions structure that exists or framework that exists with some Russian companies and that impacted the net growth in ACV that we deliver. But otherwise, we would have been [Technical Difficulty].

[Jason Celino:]

Great. And then when we think about acquisitions, so inmation, it's interesting that lead came from Emerson and obviously, we have Micromine. But – how should we think about the pace of your acquisitions going forward? And then maybe how you intend to fund them if you do see a pickup? Thanks.

[Antonio Pietri:]

Well, let me look, we certainly also want to be judicious on the M&A front with regard to how much we've taken on with – I consider the first July and August to have been months of a lot of work. It required a lot of, if you will, activation energy to put in place everything that we talked about in the prepared remarks so that we can execute the rest of this fiscal year and beyond. So I would say we were through the bulk of not only integration, board also sort of the transformation infrastructure that we needed to put in place to be successful going forward with SSE and OSI. We are patiently waiting for the Micromine transaction to close that a well-run business has been run by private equity for almost four years, high profitability, high growth. So there's no little transformation that has to be done there. It's only about immigration. And inmation, it's a small company. I also believe that if you want to be judicious about M&A, you do acquisitions when they're available. And that availability will be say our next move from an M&A standpoint. But we're making good progress with we built an organization that is focused on dividends and integration of acquisitions that is performing incredibly well. So I believe that we've grown a new muscle in the company around diligence and integration of these acquisitions that we didn't have two years ago, and that is a muscle that will rely on going forward.

[Chantelle Breithaupt:]

Yes. I think the other thing I'd add, Jason, just to kind of give you is we're in a comfortable zone on what the activity we are doing. And each of them have their own flavor to it for their own disposes. So like Antonio mentioned, the Emerson owners have seven months. We have integration. We had to hit the ground running. We had the muscle number built in the IMO team when we have. If you look at inmation, it's a horizon to play more of a tuck-in. And then Micromine is almost like its own standalone business starts funding. So I think that the difference in a variety of them also complement that it's a doable venture that we wonder look at Jason versus all the same, including strain on the same board in the same team in the organization. So I think that's another way to look at it.

[Jason Celino:]

No, that’s actually quite helpful. Thank you.

[Operator:]

And thank you. And one moment for our next question. And our next question comes from Clarke Jeffries from KeyBanc Capital Markets. I apologize about that. Your line is now open.

[Clarke Jeffries:]

Hello, thank you for taking the question. First question is just Antonio, how optimistic are you about the profitability and demand environment for the refining industry? And maybe specifically LNG, lots of headlines around reaching kind of peak storage capacity in the EU right now. Any signs that you're seeing in terms of potential cuts to OpEx budgets? Or do you see the current levels as still elevated enough to facilitate those final investment decisions for those export facilities or any other business related to LNG that you have?

[Antonio Pietri:]

Yes, let me first address LNG start and then I'll talk about refining. Look, the fact is that when these customers, operators making the final investment decision, they're making an investment decision for a 20, 30 year time frame. And the outlook for the use of LNG as a source of energy so these fluctuations – short-term fluctuations, I don't think they're going to change anything. The fact is that gas is considered will be a transition fuel for net-zero carbon emission ambitions. And the demand profile is there to support that greater investment that's gone into the ground to build this asset. So I don't think any of these changes for the storage is filled on out in Europe. With respect to refining, look, the fact is that refiners are feeling very bullish. I had the opportunity to meet over the weekend an individual in the trading function of an independent refining company. And I was actually surprised of how optimistic this person felt about their margins going forward because return only now that jet fuel demand is starting to come back, but this individual was also incredibly excited about diesel demand coming back, and these are two things that have been missing over the last 12 months. So this individual was not only optimistic about it today, but even the next six to 12 months. So I think – and it’s what we’re seeing from refiners. Good solid continued spend on our technologies.

[Clarke Jeffries:]

All right. A little bit of technical difficulties there. But a follow-up question is just on the pace of migration for SSE and DGM. I mean, certainly encouraging to see the SSE suite launched and DGM coming in the second half. Were those time lines ahead of schedule or roughly what you expected when you set out with guidance? And any incremental confidence you have in the ACV growth in those segments for the rest of the year either off of benefits to attrition or kind of the net new funnel here?

[Antonio Pietri:]

Yes. I believe [indiscernible] R&D organizations in the software industry, and they perform accordingly. So they were ahead of plan on the release of the SSE suite for Windows. I hope they achieve the same feed for the Venus version and the DGM suite because that will help us with our trajectory. Those transformations are hard, and you have to build momentum in the transformation because there’s a lot of sort of infrastructure we have to put in place systems, processes best practices organizations. And we’ve done a lot of that now in the Q1 quarter. I believe we’ve built momentum, and we’ll continue to build momentum in Q2. And that’s why in the prepared remarks, we stated that we expect a lot of the transformation benefits to start showing off – to really show off in Q3, Q4. And look, from my own assessment, I do believe that our year will come together beautifully in the Q3, Q4 for quarters in the first half of next calender year.

[Clarke Jeffries:]

Perfect. Thank you very much for taking the questions.

[Operator:]

Thank you. And one moment for our next question please. And our next question comes from Mark Schappel from Loop Capital. Your line is now open.

[Antonio Pietri:]

Hi, Mark.

[Mark Schappel:]

Hi, Antonio. Hi, Chantelle. Antonio, I just want to go back to your comments around the chemical industry and just to make sure I understand that correctly. Are you actually seeing usage or buying hesitation from these customers? Or are you just raising a few red flags, given the recent profit warnings from some of the members in the sector?

[Antonio Pietri:]

Yes. Just the latter. We didn’t see any behavior change from chemical customers if you want. We just want to acknowledge that we’re seeing this dynamic. And like I said, they’re just coming down from record profitability and revenue in the quarter to quarter, something more normal, but nonetheless, it’s a change, and we just want to highlight that to all of you.

[Mark Schappel:]

Helpful. Thank you. And then talk a little bit about the APM suite. Maybe just give us a little bit of an update in terms of any new pilots or customer wins that are worth mentioning?

[Antonio Pietri:]

Look, so we keep our update for APM to the half year. So we do that in the January call. But Look, we continue to gain traction. I do think the market has sort of unfrozen from the pandemic period. We’re seeing a lot more engagement with customers. We are seeing also bigger deals in the pipeline and more interest. I also think that customers after two, three years of trying to figure out what everything that they were being told by all these suppliers of technology and that they’re sort of cutting through the noise and focusing on those technologies and capabilities that they think will help. And I’d like to think that AspenTech in that category.

[Mark Schappel:]

Great. Thank you.

[Operator:]

Thank you. And one moment for our next question. And our next question comes from [indiscernible] with Wolfe Research. Your line is now open.

[Unidentified Analyst:]

Hi. Thanks for taking the question. Hi, Antonio. Hi, Chantelle. Thanks for taking the question. And so just a few quarters into working with Emerson software assets, what are the key impressions and what has maybe surprised you most as far? Thanks so much.

[Antonio Pietri:]

Well, I’ll give you my impression and Chantelle give you hers. Look, first of all, when I first met with Lal Karsanbhai, one of my key ask was the oil side business, because I felt they had the potential to truly become a technology leader in the utilities industry. And basically, the last four, five months have only corroborated my – what I thought was the case. They have great technology. Their customers love their technology and what they do for them, and now with the scale of the new AspenTech and our channel to market on a global basis because they’re a very North American-focused company, we’ll be able to accelerate their expansion into international markets. So very excited about that. Look, it’s been a great presence of price as well. They have unbelievable technology. We’re going to be investing in that technology to accelerate some of their innovation. But more instantly, the whole perception of SSE by customers has changed now in their partnership and ownership by AspenTech. Again, back to this opportunity to optimize subsurface and above surface facilities, AspenTech’s on capabilities in software and how we can contribute to SSE and SSE’s expertise in upstream and now AspenTech being really the only company in the market that can model the entire petroleum supply chain from the rock to the corner gas station is a very unique capability. I started having meetings with customers immediately after we close the transaction and have been so excited about what I’m hearing from this customer. So I’m very optimistic. I love the fact that we own these businesses. And they totally reposition that and help us reposition usability, CCS, geothermal energy, electrification with our own capabilities around efficiency and clarity so really from a strong sustainability position going forward.

[Chantelle Breithaupt:]

Yes. I think the things I would only add to what Antonio mentioned I agree with those. I would say for the overall, I’m completely energized by the enthusiasm to lean into the synergies that we have together. So I think that’s fantastic. I think for the OSI, DGM, I think that the team realizing the tremendous opportunity to digitalize that industry, the transmission distribution industry is very encouraging. I think for the SSE side, having the team jump in with the token that’s now available for Windows and Linux coming. We believe that to take that and run with it in the first quarter. It was very impressive. So I think this really good data points in the first quarter is very encouraging.

[Unidentified Analyst:]

Great. Thank you so much.

[Operator:]

And thank you. And I am showing no further questions. I would now like to turn the call back over to Antonio Pietri, CEO, for closing remarks.

[Antonio Pietri:]

Thank you, Justin, and thanks, everyone, for joining what is the first earnings call of the new AspenTech. We look forward to engaging with all of you on the road here in the next few weeks and months. Thanks.

[Operator:]

This concludes today’s conference call. Thank you for participating. You may now disconnect.