All right. Welcome back from lunch, everybody. We're delighted to have Aspen Technology here with us. We have Antonio Pietri, CEO, and then Chantelle Breithaupt, CFO. I am Meta Marshall. For those who don't know, I cover networking equipment and communication software at Morgan Stanley. Antonio, let's just start with a overview of AspenTech. It's been a very eventful year with the closing of the Emerson transaction. Could we start just talking about the new AspenTech business and the key strategic reasons for the combination? No, thank you for having us here. Let's start with the sort of strategic reasons. I mean, look, I always felt that in AspenTech, we lacked scale as a software company, and that really became very obvious in the 2020 period as multiples were expanding in the marketplace, and we pursue some M&A that we couldn't eventually close because of our size and capacity. It made sense that we pursue some strategic options. Eventually out of all that process that started in early 2021, the Emerson transaction was born. We announced it in October of 2021 and closed it in May of this year. Really, multiple reasons. One, give AspenTech scale and the two businesses that we took on from Emerson now made us a $1.2 billion revenue company. Also the ability to have a partner that can support inorganic growth. M&A become more acquisitive, diversified into new industries, which we did as well with into utilities and upstream and now mining. Just evolve the value proposition from the company from purely around profitability efficiencies to also sustainability. That's what we've done. I think we've accomplished all four. Now with Emerson and these two businesses that we've acquired, things have changed completely for the company. We're now into utilities, the grid transmission and distribution and the role that global electrification will play to drive net zero carbon emissions by 2050. We're into Upstream Oil & Gas, but really those same technologies can be used for carbon capture and sequestration, for geothermal energy. Since we closed the Emerson transaction, we've already done two acquisitions. I mean, we've done one in Inmation, which is around enterprise data management, and we've announced a Micromine acquisition that we hope to still close here in Q2, which moves us into mining and digitalization. Now the company is uniquely positioned around both profitability efficiencies and sustainability going forward and into industries that we believe will play a key role in the energy transition. Got it. You touched on a couple, you know, utilities, mining, upstream. Can you just kind of give an overview of the key end markets that you serve and just what trends that you're seeing in them, you know, kind of expanding upon what some of you just introduced? Well, look, sort of Heritage AspenTech, our core markets, really, Oil & Gas, but refining a little bit of upstream, chemicals, EPCs. It's always been about driving efficiencies through automation, digitalization in those industries. Of course, you know, we have an energy transition and a lot of questions around Oil & Gas, but we still believe that this is an industry that will continue to contribute meaningfully into energy and global energy supplies. We expect over the next three to five years, this industry to continue to invest in Oil & Gas production. Refining, you know, is part of the energy transition as well, but we've seen refining margins be at historical highs over the last six to nine months. We see an increase in demand for jet fuel as airlines are coming back to full execution on transportation and also diesel for transportation. We think refining is great. Chemicals had a banner year. Chemical demand is expected to soften from historical record profitability to a more historical range of profitability. EPCs, they've reinvented themselves, a lot of them into sustainability, executing on the CapEx around sustainability, solar, wind, hydrogen, biofuels, and all these new sources. Look, utilities is a regulated industry, but that will benefit meaningfully over the next 20, 30 years from CapEx to expand the grid transmission distribution. The complexity of the grid is increasing because of renewables and the intermittency of renewables. Technology will be of greater need to manage the grid and maintain it in balance, then cybersecurity as well. Then, in mining is metals for electrification and what is expected to be a CapEx super cycle for mining around producing the metals for electrification. Then you have sustainability as a huge macro trend. The expectation that, you know, $3 trillion-$4 trillion of sustainability CapEx every year for 30 years, so $130 trillion-$150 trillion over the next 30 years. We think that's, you know, the energy transition and net zero carbon emissions by 2050 is a challenge, but it's also a huge business opportunity. Got it. You know, you've mentioned a lot of markets there. Just who are your main competitors, and how has that competitive environment evolved over time, maybe particularly with the Emerson acquisition? You know, interestingly enough, because, you know, yeah, we're a software company but in the industrial space, we're targeting asset-intensive industries, industrial manufacturing, industrial production. We find ourselves competing all the time with industrial companies. Honeywell, Schneider, GE, Siemens. They've been our historical competitors Heritage AspenTech. They're historical competitors in utilities now. In Upstream Oil & Gas, it's a little bit different. It's Schlumberger. It's Halliburton, which are also sort of industrials in a way, oil field services companies. Much larger companies with greater capital. Our advantage is just being a pure software company that is focused on delivering digitalization through software. Got it. You know, you mentioned sustainability earlier and kind of the amount of dollars coming into that market that you guys can benefit from. Can you just talk about kind of the specific areas where you would see the benefits of those dollars coming in? Yeah. I mean, look, perhaps it's not as clear to most people, but in order to hit 1.5 degrees Celsius warming by 2050 or keep it at 1.5 degrees Celsius warming by 2050, we need to hit a 2030 target that can only be achieved through efficiencies. Meaning making everything more efficient so that it consumes less energy, there's less emission reduction. That's what we've done historically in AspenTech, driving efficiencies in our customers' operations so they consume less energy and therefore drive less emissions. That's number one. The other thing now with these assets that we acquired from Emerson is decarbonization, Carbon Capture and Sequestration, and CCUS as well, geothermal energy production, hydro energy production, biofuels, and in that also hydrogen. These are also chemical. These are processes that involve chemistry. We model chemistry. Hydrogen is really a chemical process, hydrogen production. We can use our historical, our heritage engineering software to model the hydrogen production. Also we've engaged with customers to model the hydrogen supply chain, not only the production, but the transportation and the storage of hydrogen. On biofuels, you now have refineries, oil refineries that are being converted into biofuel refineries, where the feedstock is cooking oil. These refineries have continued to use our technology. The only thing we've had to do is they've modeled, established a molecular characterization of cooking oil in order to process it as a feedstock for these refineries. Then you have electrolyzers for hydrogen production. We can model the design of an electrolyzer and then the operation. You get into circularity and pyrolysis for chemical advanced recycling. You just go down the list and the fact is that we are so well-positioned around all these sustainability investments and trends going forward, that that's why we feel so excited about the future of the company. Got it. Maybe just shifting to kind of the evolving sales strategy for the Emerson transaction, can you just walk through the direct sales efforts and the commercial agreement with Emerson and just that impact to the overall business? Chantelle love to talk about that. Thank you, and very nice to be here with you. I think that I'll start with the commercial agreement, and then we can switch over to the direct sales side. The commercial agreement actually was a very thoughtful agreement between the time we announced and closed October to May, and that commercial agreement actually allows us to work with the Emerson end market industries that we don't currently play in. We can resell our software through the Emerson sales force into pulp and paper, wastewater management, et cetera. That opens up new industries beyond the diversification we've already done. The key thing to that is to have a clear structure. They have set up a sales team specifically for these software sales. We've done quota commissions, set up commercial operations to enable it. The whole go-to-market from quote basically to the end market has been established, which is very key to hit the synergies expected right out of the gate. I think too in the sense of that's sort of the first phase. The second phase is looking at OEM capabilities of our software being placed within their hardware sales, some of their control processes and hardware, et cetera. That's like the two-step evolution of the commercial agreement. Then if you want to comment on the direct sales piece, Antonio. The commercial agreement in a way has three phases to it. The initial phase is Emerson establishing a sales team that will resell AspenTech's products into their verticals, and that's water and wastewater, food and beverage, pulp and paper, industries where AspenTech is not. The pharma, Emerson has the second-largest market share for industrial hardware systems in pharmaceuticals. We are in pharma as well. We believe the Emerson presence in pharma will accelerate the growth of our products in pharma. There's mechanisms to decide who's gonna lead what accounts in pharma. In our core markets, chemicals, refining, EPCs, we maintain ownership of those verticals. There's an exception process if Emerson finds opportunities, but that'll be mostly AspenTech. Emerson has identified a team of salespeople that are dedicated to reselling AspenTech products. They have quotas. They're gonna get paid on that quota. We have established an Emerson commercial organization inside Aspen that is supporting and enabling that sales team through training, materials, sales operations and so on. Eventually that the two organizations will grow as the synergies grow in the out years of the five-year deal model. The second phase of the agreement is really the OEM piece, which is Emerson will OEM some of our products that will become embedded into their next generation distributed control systems. They'll be native to their platform. AspenTech will be inside the Emerson systems. The third phase of that agreement is co-innovation, where Emerson and AspenTech co-innovate, develop joint solutions that then we take to market under one brand, whether it's Emerson or AspenTech. I think it's a pretty ambitious commercial agreement. We've already got teams set up with quotas. We're working on it and it's part of the synergies and we're pretty bullish about what we're seeing early on. Got it. You know, you've remained pretty acquisitive following the Emerson transaction with the acquisition of Inmation and the pending acquisition of Micromine. Can you just talk about the opportunities that you see with these assets? Let's talk about Micromine first, and again, we're still expecting to close it in Q2 here by the end of December. Mining, not only metals for electrification and the expected CapEx super cycle coming up, but mining is one of the least digitized industries. To me, mining feels like the refining or chemicals industries in the mid-nineties, sort of early days of digitalization. We think there's a big opportunity there, not only Micromine, but use Micromine as a channel for some of AspenTech's products, especially asset predictive maintenance around equipment failure is one of the big use cases that we have for our APM suite. Also with OSI Microgrids. You know, every one of these mines is in a remote location, so they have to generate their own power, so they have a Microgrid, so we can. More and more of these miners are talking about introducing renewables as part of their commitment to sustainability. Those Microgrids become more complex, so OSI and some of their products will be an opportunity. It expands the TAM for us in mining now having all these offerings for miners. Look, Inmation, AspenTech historically has been an applications products company targeting operations or Operating Technologies, OT. We hear more and more from our customers that despite moving all their data into data lakes in the cloud, they're not able to leverage that data because that data is not contextualized, it's not a structure, it's not of good quality, there's missing data. The value for that data is not being exploited. Inmation is a middle layer for enterprise data management that provides contextualization, data structuring, cleansing, and structuring capabilities to data and is an on-prem data lake with those capabilities embedded. The goal is to bring order to data so that they can then be exploited for analytics and AI and so on. Our goal will be continue to be that OT company that we've always been and become more so, but have an IT stack that we can also offer to our customers and prospective customers to help them organize and contextualize their data to create more value from it as well. The information that our own products generate that would go into those data lakes. Got it. I mean, that's a lot of acquisitions. Just can you give a sense of what your philosophy is around M&A and just capital allocation? The capital allocation strategy has definitely pivoted from when I started a year and a half ago, not just because I started, but the timing of the Emerson transaction. With the goal of being more acquisitive with having Emerson as a partner in that relationship, we still keep the framework of looking at targets that are accretive to double-digit top-line growth. We can get into our profitability model of 45%-48% of non-GAAP operating margin as a percentage of ACD. We look for that framework, and we hold that. We don't do M&A just for the sake of M&A. The capital allocation strategy has definitely pivoted away from more traditional share buybacks to, you know, everything from tuck-ins to larger acquisitions. That's what we'll be focused on for a few years to come. I would say as far as the markets we're looking at, we're looking at, Antonio had mentioned, you know, process industries, sustainability agenda. I think that's a good kind of crosshair of where we're looking. I would say that we're looking for industries that have pools of value that haven't been untapped, similar to what Antonio had described in the mining industry, where we see, we see a projection within three-five years of the deal model getting to the framework we had just proposed or I just suggested. That's, that's what we're going with, working with Emerson, enabling some of it to be the larger acquisitions. We're very excited, and we have definitely a target list of things that we're considering. Got it. You know, last quarter, you were kind of giving an update on some of the business model transitions that were going on in some of your sales models. Can you just kinda level set for investors, you know, where you were coming from, where you're trying to go to, and where you are on that journey? Do you want? Go ahead. I think that I'll begin at least in the sense of the synergies we have. There are four buckets of synergies. There's the growth, transformation, cost, and the commercial agreement. We've covered the commercial agreement. Cost is fairly self-spoken. I think the transformation is the piece of synergies that's the most descriptive and the toughest challenge, but we're confident on how we're going to do that. OSI Inc. coming in in the transmission and distribution, their current business model is very much perpetual services project milestone completion kind of solutions to their customers. That journey of transformation is to get them from perpetual to term licenses, minimize the services ratio, and we're still working through that services ratio, to make it a software play too. That's the transformation. The new sales of OSI, which are the global expansion, they'll go with that new model of term. The conversion of the existing customers from perp to term will take a few years as we work through their cycles of renewal or upgrading their software. On the SSE side, it's coming in as a term license business, very similar to Heritage, what we refer to as Heritage AspenTech. That we've already announced the conversion to tokenization for the Windows-based customers. The Linux one is coming in the early calendar year. That's a little less of transformation in the sense of the time it will take. The go-to-market expectations, similar to Heritage AspenTech in the sense of the contracts, three-five years, having escalation built in, non-cancellation clauses. We're gonna take it to the same go-to-market kind of contractual model, go-to-market model. I don't know if, Antonio, if there's anything you want to add. No, no. I mean, look, transformations are not easy. Luckily, we did our own transformation. I was the head of operations in 2009 when we kicked off our transformation, and AspenTech is seen and considered one of the most successful transformations that have happened in the software space. A lot of learnings and experience from that we're applying to the transformation of OSI and SSE. Key and centerpiece to all of this is a launch of these suites and tokens, which we've done for SSE, we'll do for OSI and the second version of the SSE suite as well. Is working with customers to take them from perp licenses to term and reducing the component of services that exist today for the OSI business by building an ecosystem that then takes on those projects and those implementation as opposed to AspenTech doing that. Okay. You know, you mentioned some kind of longer term financial targets that you had out there. Just what are the levers to achieve those? I'm presuming some of the buckets that you had just laid out, but just kind of timeline or contextualize- Yeah, sure. achievement of those. Yeah, sure. Happy to do so. Over the five-year model that went with the Emerson closing of the transaction, the key thing, I think, to net on is the outcome is to be accretive of $110 million of EBITDA in the sense of the running margin rate. How we get there, the timing. The cost synergies basically come out of the gate. We had seven months between October and May to plan all of the synergy tracks with accountability and owners. The cost synergies started right as soon as we closed the transaction. The growth synergies, where Antonio referred to being able to pull the portfolio together, those account plannings kicked off at our fiscal year, so they're underway. The transformation, SSE is probably more of a 12-month transformation. OSI is anywhere between conversion and getting the token suite ready, 12 to 24 months. So those levers are in place. The commercial agreement has kicked off like we had mentioned, and those synergies have quite a steep ramp up as we go through those five years. There's a lot of expectations on the commercial agreement, and those will continue to grow over that five-year trajectory. Got it. You know, on the last earnings call, you sounded relatively constructive about the macro environment, but just kind of give a sense of what is kind of giving you that confidence, and just what you're seeing in the market currently? Well, let me look at first of all, a pipeline of business, customer conversations. Of course, because our fiscal year is July 1st through June 30th, we have this moment right now when customers are budgeting for next calendar year. It is an important moment because it's in January, February, when we will learn what these customers have budgeted for spending. Nonetheless, talking to them and then looking at the key metrics that we track to understand their health, if you will. The price of oil, whether it's $70-$80 or $100-$110, is still a very good range. These companies will be printing money at $70-$80, just a little bit less than they do when they're at $100-$110. Oil refining margins were at record highs in the September quarter. They've come down a little bit. Now you have jet fuel demand increasing because of airlines and people traveling, and also diesel, which will support very healthy refining margins into calendar 2023. Gasoline demand is expected to sort of come down a little bit. That will be overcome by the jet fuel and diesel demand. You've got chemicals margins and demand. While that's come down in the last quarter, in the last couple of months, from historical highs, it's back to sort of a normal historical range. We consider them to be in a good range. The utilities industries is a regulated industry. It's really driven by government spending and municipalities and states. Now you have something like the Inflation Reduction Act in the U.S. that has at least $2.5 billion to upgrade the grid in North America. You also have you know, out of COP27, which I attended the first week, you know, U.S. transmission capacity has to triple by 2050. Global electricity transmission capacity has to go up by 10 times by 2050 in order to maintain warming at 1.5 degrees Celsius. I mean, that's a huge investment going forward. So, the complexity of the grid, the expansion of the grid, cybersecurity will drive investments there. Upstream Oil & Gas we think will continue to benefit from better investments over the next three-five years. Expectation that national oil companies will expand their CapEx budgets by 10%-15%. National oil companies probably meets, international oil companies probably meet single digit. Then mining, a continued expansion of CapEx in mining. To us, and I know everyone is worried about what 2023 looks like, to us all of our indicators are green. Mm-hmm. We also wanna wait and start talking to customers about their budgets in January, February. We think we'll have a good macro environment, a good spending environment from customers into 2023. Got it. Are there any questions from the audience? There's one. Mm-hmm. Thank you very much for the presentation. It's quite general question. I wondered if you compared to, say, five years or 10 years ago, how has your competitive landscape changed? It sounds like it's been quite a fair amount of consolidation. A little bit more on competitive environment in the past five, 10 years and going forward. Yeah. Yeah, the competitive environment, look, we compete against industrials now. One of our main competitors in with Heritage AspenTech was AVEVA, who's now been acquired by Schneider. You know, I've always felt that as a software company, job number one is innovation. In a way, we're the premium price supplier of technology in our space, our goal has always been to continue to deliver innovation to our customers to justify that premium that customers pay for our products. I think we've achieved that. We continuously gain market share every year. It's industrials that we're competing against which are not exclusively focused on software. We are. That's been the case the last five, 10 years, the last 20, 30 years. I mean, look, going forward, same scenario for Heritage AspenTech. It just so happens that it's the same set of competitors with OSI. Now, SSC, what used to be called GSS, our Subsurface Science & Engineering business in Oil & Gas Upstream. It's Halliburton. It's Schlumberger. There, what we think, though, is happening is that customers' views of SSC have completely changed now that it's part of AspenTech. One, there's a bigger opportunity, which is bigger loop optimization, which is optimizing above surface facilities and below surface production. AspenTech is the only company that can do that. That's changed our customers' views of SSC, and we're seeing that in conversations that we're having. Schlumberger and Halliburton are formidable competitors, but we feel good about the muscles that we're developing to compete with them. OSI is all industrials, like I said. Micromine is really more software players, Bentley, Dassault, Hexagon. But we don't feel we're gonna be competing in mining exclusively on the same basis, meaning a product-to-product competition. In mining it'll be, okay, Micromine, but it'll be AspenTech's asset predictive maintenance capabilities. It'll be the OSI Microgrid and distributed energy resource management systems capabilities around renewables, and so on. We will have a much broader offering than these other companies in mining that will elevate us into sort of an enterprise sale space, which I don't think they can have in mining at the moment. We feel good. Look, you have to show up and compete every day, and that's what we like to do. Got it. Maybe just last question from me. You know, what do you think is most misunderstood by investors today about the company? Mm-hmm. She has a new perspective on the company. Yeah. I always like to hear what she has to say. I think that at least the questions we get, trying to reconcile honestly what things like oil prices do. Mm-hmm. I think that we have to shift that narrative to be: How do they budget their calendar years? There's a lot of, I think, misconception or questions there. I think that also, too, trying to understand how CapEx, all the CapEx we speak of actually translates into business for AspenTech. We're learning how to tell that story in a way that's digestible, because there are so many CapEx trends coming our way across all the industries that Antonio mentioned. I would say those are two of the things I would observe, yeah. Yeah, you know, I'm now into my 10th year as CEO of AspenTech, and although this is new AspenTech, I feel like I'm a new CEO explaining a new company. Look, in 2015, 2016 were the first crash in oil prices that I experienced as CEO. I had to explain the different drivers for investors on how oil prices were impacting, and really not oil prices, but CapEx. I had to establish a clear difference between oil prices and CapEx spend, which is really what impacts the company, CapEx spend. I think we did a very good job explaining that to investors. I think now the bigger questions are around sustainability and, which Chantelle mentioned, how is sustainability gonna be driving our business? Is spending from sustainability? Which is not a misunderstanding or misperception, but is really how does it flow, you know, all this spending into AspenTech? How much of it can it be eventually? Mm-hmm. Got it. Perfect. Antonio, Chantelle, thank you so much for being here today. Thank you. Thank you. Appreciate it. Good job. Thanks.