Thank you for standing by. Welcome to the third quarter 2023 Aspen Technology earnings conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question- and- answer session. To ask a question during the session, you'll need to press star one one on your telephone. To remove yourself from the queue, simply press star one one again. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Brian Denyeau, ICR. Please go ahead, sir. Thank you. Good afternoon, everyone, and thank you for joining us to discuss our financial results for the third quarter of fiscal 2023, ending March 31st, 2023. With me on the call today are Antonio Pietri, AspenTech's President and CEO, and Chantelle Breithaupt, AspenTech's CFO. Before we begin, I wanna 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 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 periodic reports with the SEC, including our most recently filed Form 10-KT with the SEC. Please note that the following information relates to our current business conditions and our outlook as of today, April 26, 2023. Consistent with our prior practice, we expressly disclaim any obligation to update this information. Please note that we have posted a financial update presentation on the investor relations portion of our website. The structure of today's call will be as follows: Antonio will discuss business results of highlights from the third quarter, followed by Chantelle, who will review our quarterly financials and guidance for the remainder of fiscal year 2023. Let me turn the call over to Antonio. Antonio? Thanks, Brian, and thanks to all of you for joining us today. AspenTech's third quarter performance was solid despite an uncertain microenvironment, with a strong demand in many of our end markets and a return to double-digit ACV growth. While we did see the macro environment have a more pronounced impact on sales during the quarter, primarily in chemicals, we're glad to be reporting double-digit growth for the last 12 months and are on track to deliver against our initial guidance range for the full year. As we know the last quarter, chemical customers had been reporting weakness in the demand environment starting in their September calendar quarter, with the drop in demand being significant in their December quarter as reported in their related earnings announcements. As a result of these dynamics, we believe their calendar year 2023 budgets reflect tighter OpEx budgets, which resulted in a material pullback on software spending in the quarter for AspenTech, led by bulk chemical producers. We will remain cautious about the software spending outlook from this industry for the remainder of the calendar year. Overall, we're pleased with the progress of many of our key strategic priorities through the third quarter. A key focus for us this year has been the transformation of the OSI and SSE businesses and successfully integrating them with Heritage AspenTech to create a much larger, diversified, and faster-growing industrial software leader. Now, looking at our financial results for the third quarter, annual contract value or ACV was $854.6 million, up 11.2% year-over-year. Revenue was $229.9 million. GAAP loss per share was $0.89, and non-GAAP EPS was $1.06. Free cash flow was $129.3 million. Please note there were some short-term timing dynamics this quarter that Chantelle will discuss later. Looking at the quarter in more detail, we continue to see a strong demand environment in most of our end markets. Commodity prices and CapEx and OpEx budgets remain constructive, and we're seeing continued growth in our sales pipeline across all three businesses. AspenTech is in an enviable market position, where our solutions directly address the overlapping need for increased production of energy, chemicals, and electricity in a sustainable manner. We're encouraged to see that customers' investment in sustainability and their interest to invest in AspenTech solutions to meet the dual challenge remains robust despite the uncertain microenvironment. We believe our diversified portfolio across traditional energy sources, chemicals, power transmission and distribution, and emerging sustainability areas like carbon capture and sequestration and hydrogen, give AspenTech numerous ways to benefit from these trends for the foreseeable future. I would now like to spend a moment providing details on what we're seeing in the market and our performance by vertical. Refining remain a source of strength in our business as it has been historically. While macro uncertainty exists, a strong global demand for refined products is expected to keep refining margins healthy through calendar 2023. We're seeing many refiners continue to increase investments to meet the stringent emission standards put in place by many countries globally, including the EU's mandate for a 55% reduction in greenhouse gas emissions by 2030 and net zero by 2050. Having consistent and reliable sources of energy is a security imperative that increases the need for traditional energy products until the transition is achieved. With respect to the upstream and midstream industry, the strong short and medium-term outlook for oil and gas demand is helping to drive double-digit increases in CapEx budgets in 2023. This projection is reinforced by the International Energy Agency's forecast of record demand for oil in 2023, reflecting the ongoing recovery in air travel and the reopening of the Chinese market after its COVID shutdown, among other factors. We're seeing excellent traction with our end-to-end set of solutions for this market. The combination of Heritage AspenTech's expertise in above surface upstream energy production with SSE's market-leading sub-surface modeling solutions gives customers the ability to manage and optimize the entire exploration and production envelope and ultimately optimize the entire oil and gas value chain using our solutions from the ground to the pump and across into chemicals. SSE, in particular, has performed well beyond our expectations on an ACV basis year-to-date, and it is seeing very positive customer demand trends. This strong end market demand is being complemented by the transition of SSE's commercial agreements to align more closely with Heritage AspenTech, which was one of the key transformation priorities for this business. For example, the recent introduction of the token-based SSE Suite has received excellent feedback from customers and is contributing to growth in our pipeline. We signed several notable wins in the third quarter, including being selected by one of the leading international oil companies to be the engineering modeling and simulation technology that will standardize on for facility design in their nascent carbon capture and sequestration business, which they predict could generate billions in future revenue for their company. This customer selected us after evaluating multiple competitors of AspenTech in the market. This win is a great example of how the SSE Suite combined with our engineering suite will support customers' sustainability efforts. The growing investment in oil and gas projects also continues to positively impact the E&C industry and customers' backlogs, accelerating the growth in spend for our engineering suite with this customer segment. In recent quarters, we have seen a steady improvement in demand from these customers as they execute on their expanded backlog of projects. It is now clear that a significant number of our E&C customers are materially benefiting from sustainability CapEx investments by way of improved backlog growth, which in turn is supporting greater usage of our engineering products. We believe current trends in both traditional oil and gas projects as well as newer sustainability projects represent a more durable and diversified opportunity for AspenTech in this market going forward. Shifting to the power transmission and distribution or T&D industry. This industry continues to benefit from significant investment in T&D infrastructure critical to meet the sustainability goals of the future, making this market one of the most attractive long-term infrastructure opportunities in the world. Electrification of the global economy is driving rapid growth in demand for electricity and for our DGM solutions. Utilities recognize grids need to expand and become more reliable to handle the increased demand for electricity and additional complexity introduced by the growing mix of renewable sources of power generation. All of these compounded by the rising rate of outages resulting from unpredictable storms. Additionally, hardening the security of the grid against the threat of cyberattacks is a national security issue and a top priority for these customers. We believe the only way to do this efficiently and at scale is through broader adoption of software technology. We recently validated this thesis at the industry conference, DISTRIBUTECH, where we witnessed firsthand the high level of interest and demand for DGM product demos from many of the world's leading utility operators. We're making good progress on the ongoing transformation of the OSI business and go-to-market efforts for our DGM products. One key pillar of the transformation of OSI and its go-to-market activities has been educating utility customers on the benefits of adopting the term software license model, which is happening faster than we expected. Customers are embracing the benefits of the model, such as access to term license-only software capabilities and for some customers, the opportunity to leverage CapEx budgets to fund these projects. This is a great outcome that will accelerate the long-term transformation of the OSI business. The introduction of the DGM Token Suite will soon make the full range of benefits from this licensing model available to customers, which we believe will lead to broader deployment of the solutions in the DGM Suite. While we're on track to achieve our growth target for term software ACV from new DGM product transactions for the year, we have also identified two items during the integration and transformation process that will have an impact on OSI's financial performance by reducing expectations for its ACV and revenue growth in the year. First, we identified several areas for improvement in OSI's project delivery organization, impacting several contracts that were signed prior to the Emerson AspenTech transaction. These projects will take longer than expected to complete and thus delay achievement of project milestones for revenue recognition. These delays also present headwinds for the recognition timing of perpetual SMS ACV, booked as part of these bundled deals. Second, it has also become clear that our assumption that we could accelerate the D&D market sales cycle to bring it closer to Heritage AspenTech was overly optimistic. While we're pleased with the amount of demand generation activity we're seeing in this market, we also now expect that DGM transactions will likely take 12-24 months on average to complete, versus Heritage AspenTech's traditional 9-12 months. It is important to note that both dynamics will be short-term in nature, are well understood by our team, and reflected in our model going forward. We remain incredibly optimistic about AspenTech's opportunities for growth in the D&D market. Finally, in the chemicals industry, a combination of factors, including higher energy costs and persistent supply chain challenges, have led to significant destocking and declining demand for these companies, resulting in a material impact on these customers' margins. This was most notable in the bulk chemicals market, which historically is more sensitive to macro environment than specialty chemicals. This resulted in a pullback in customers' OpEx software spending in the quarter that was more pronounced than than we anticipated. For the first time this fiscal year, we saw sales cycles elongate in all regions with an increased number of deal postponements and a push-out of the existing pipeline. Note that software spending from chemical customers is a primary driver of growth for our MSC suite. Despite these near-term challenges, we continue to be positive on the long-term prospects for the chemicals market and expect it to be a meaningful contributor to our growth over time. While we continue to work through the demand environment for our APM business, I would like to highlight its performance during the third quarter. APM closed a handful of meaningful transactions globally, with one existing customer signing a seven-figure transaction to expand their APM deployment across several of their businesses. I would now like to share some additional customer wins from the quarter that demonstrate our success. First, one of the largest engineering companies in the world and a long-term user of our engineering suite increased their token entitlement by more than 10%. This customer is benefiting from sustainability CapEx investments for carbon capture and sequestration and hydrogen projects. As such, they are seeking to meet their engineers' usage needs for their current backlog, as well as their expectations for backlog growth in calendar year 2024. Second, a national oil company formed a new entity to take control of exploration and production assets from their former international oil company partner. As part of this process, this new company signed an agreement with AspenTech to maintain and expand its access to our SSE products. With expectations to significantly increase exploration-driven activities over the next two, three years, this customer more than tripled its number of employees who now have access to SSE products. Future expansion opportunities with this customer involve signing an enterprise agreement to consolidate and expand access to other AspenTech product suites across all its holdings. Third and final is our successful win of an RFP for a long-term customer of OSI, who has deployed many of our DGM products across its grid over the years. This customer issued an RFP to replace their existing real-time data historian, which was end of life by one of our industrial company competitors. After evaluating our bid versus that of our competitor's recently acquired historian product, the customer chose OSI's CHRONUS product. In addition, this customer had already agreed to deploy our security authenticator OpenAM product by November 2024. Because of a control center upgrade, we're now accelerating its deployment to the spring of 2024. Furthermore, this customer is currently fulfilling a grant with the Department of Energy for a future application funded by the department to implement advanced distribution management solution capabilities, which were also quoted. This series of wins by OSI with a long-standing customer speaks to the strength of our DGM product suite, significant D&D end market demand, and our ability to help customers accelerate outcomes to better manage the growing complexity of the grid. Turning to our innovation investments, we were proud to release our new emissions management solution during the quarter. This new solution combines OSI technology with our traditional software expertise to consolidate customers' emissions data alongside plant, enterprise, and value chain OT application data into a single pane of glass view. With a holistic view of their emissions, abatement targets, and margins, customers can now make real decisions of the most meaningful and cost-effective way to reduce emissions in their operations. This is an exciting example of how AspenTech can help directly reduce our customers' carbon footprint. It is also an important example of product synergies from the Emerson transaction, as we will be bringing what was originally an OSI product to our energy and chemical customers. We also announced a recent partnership between AspenTech, Emerson, and Microsoft that demonstrate the successful evolution of our relationship with Emerson, as well as our commitment to helping energy and industrial companies advance their sustainability goals, including reaching their net zero targets. The three companies partnered to install a demo of their joint hydrogen value chain solution that helps optimize CapEx investment, lifecycle operating cost of production, supply chain, and storage infrastructure to expedite and speed to market. In a new exhibit at the Microsoft Energy Transition Center of Excellence in Houston, which was launched at a grand opening on March seventh. During the exhibit, customers were excited to see a real, palpable demonstration of a solution that will help to accelerate their sustainability journeys. I would like to briefly mention our ongoing efforts to leverage generative AI capabilities in our products. It is early days, but we have identified many use cases where this capability can help improve the workflow and time to value for our customers. We will provide more details on this exciting area in future calls. I would now like to provide our latest thoughts on our outlook for fiscal 2023. We're tightening our ACV growth range to 11%-12%, comprised of approximately 4 points of growth contributed by DGM and SSE, and the remaining 7-8 points from Heritage AspenTech. This compares to our prior guidance of 10.5%-13.5%. Our updated outlook reflects the following. First, we expect the demand environment and business dynamics that our customers experience in the third quarter of fiscal 2023 to continue in the fourth quarter. Second, the change in the high end of our updated range is predominantly attributable to the pullback in chemical customer software spending, as well as other geopolitical considerations now impacting growth. We do not anticipate any improvement in these two areas in the fourth quarter. Third, DGM and SSE are still tracking to deliver approximately 4 points of growth for the year. The relative contribution will be different than we anticipated. SSE has meaningfully outperformed our expectations this year and is now expected to deliver the majority of the ACV growth for these two businesses. Conversely, extended implementation timelines for certain projects and longer sales cycles in DGM will reduce its near-term contribution to ACV growth in fiscal 2023 relative to our initial expectations. To be clear, we expect this to be only a short-term issue and is primarily a function of timing. We're very optimistic on OSI's market opportunity and expect it to be a significant growth driver over time. As we have discussed throughout fiscal 2023, we intentionally constructed our guidance with a wider range to account for the number of variables facing the business this year, including our efforts on the integration and transformation of OSI and SSE, the potential volatility in the economy and uncertainty around some of our end markets, COVID, and other geopolitical factors. We believe the new guidance represents a solid outcome for the year and is in line with our initial expectations in a year when we have been executing on a significant integration and transformation effort in the context of high economic and geopolitical uncertainty. Finally, we're making some changes to realign our senior leadership team to bring greater focus to our execution and especially our transformation activities. Effective today, our current head of global sales, Felipe Suarez Pinto, will now report directly to me. Felipe is a 20-year veteran of AspenTech and has been running our global sales organization for the last two years. Our current CRO, Manish Jha, will be transitioning to a new role focused on all aspects of customer success, including professional services, customer support, and partners. We believe these changes will better position AspenTech to meet our future goals and objectives. Let me finish by saying that we continue to be incredibly bullish on the opportunity ahead for AspenTech. We have successfully brought Heritage AspenTech, OSI, and SSE together and laid the foundation for long-term, durable, highly profitable growth. We're aligned with several highly attractive market trends that provide numerous opportunities for success. I would now like to turn the call over to Chantelle. Chantelle? Thank you, Antonio. I will now review our financials for the third 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 bookings and more specifically, renewal bookings. 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 non-linearity will have a significant impact on the timing of our revenue. We use ACV, which we define as an estimate of the annual value of our portfolio of term license and term and perpetual software maintenance and support our SMS agreements. Primary growth metrics. ACV provides insight into the annual growth and retention of a recurring revenue base, which is the majority of our overall revenue as well as recurring cash flow. Because of the Emerson transaction, the subsidiary that included the OSI and SSE businesses became the surviving entity. As a result, the year ago comparisons you see in our reported financial statements only includes OSI and SSE in the third quarter of fiscal 2022, and year-over-year comparisons are not meaningful. Annual contract value was $854.6 million in the third quarter of fiscal 2023, up 11.2% year-over-year. Quarterly ACV was impacted by the weaker chemicals demand, the impact of certain DGM services projects that extended beyond their completion date and longer sales cycles for DGM solutions as referenced by Antonio. We are encouraged that DGM's term software ACV has begun to benefit from achieving separability, as we discussed last quarter. It will be lower than expected due to the longer sales cycles. We published a presentation on DGM separability today after market close to provide investors with a more detailed overview of the topic and what it means for our business going forward. This can be found on the presentations section of our IR website. 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 SSC, was approximately $712 million at the end of the third quarter of fiscal 2023, which increased 8.6% year-over-year and 2.1% sequentially. As a reminder, we intend to provide this annual spend disclosure for Heritage AspenTech only for fiscal 2023 to provide investors comparability with our historical disclosures. Total bookings was $231.3 million, a 15.4% decrease year-over-year. As a reminder, bookings are impacted by the timing of renewals, which were down year-over-year. Please refer to slide 11 of our third quarter earnings presentation, now available on our IR website for a complete description of how to define bookings. Total revenue was $229.9 million for the third quarter. In addition to the lower bookings in the quarter, there were two other items that weighed on our quarterly revenue performance. First, while we are seeing accelerated demand from customers for SSC solutions, we have not yet started to extend SSC contract duration meaningfully beyond its average historical length of one year due to customer uncertainty from the macro environment. As a reminder, under Topic 606, contract duration impacts the amount of revenue recognized. Secondly, several OSI services projects that have extended beyond their completion date are a headwind to revenue under OSI's historical percentage of completion accounting. We have taken several steps to avoid this outcome in the future, including accelerating the hiring to staff projects, enabling an ecosystem of third-party partners to implement services projects, and instituting best practices to make the service business more predictable overall. These actions are all part of the OSI integration process and have helped to lay a solid foundation for the business. We are confident about the ability to grow from this new baseline going forward. While the OSI services business did face some headwinds in the quarter, we are excited to see the accelerated conversion of DGM customers to term from perpetual license transactions in the pipeline, which is more in line with our core business model and value proposition. Turning to profitability, beginning on the GAAP basis. Operating expenses for the quarter were $214.6 million. Total expenses, including cost of revenue, were $308.4 million. Operating loss was $78.5 million. Net loss for the quarter was $57.6 million, or $0.89 per share. Please note that the net loss includes the impact of two AUD foreign currency derivatives related to the pending Micromine acquisition. Namely, a realized gain of $10.3 million upon settlement of the first derivative. Secondly, a non-cash loss of approximately $25.1 million related to the mark-to-market adjustment for the new derivative entered into our third quarter. The total unrealized loss we have incurred relating to this derivative activity has been approximately $45 million year-to-date. As an update on Micromine, we continue to work to secure the final remaining international regulatory approval in order to complete this acquisition. We remain committed to completing this transaction and are very excited to bring this team and solutions into AspenTech. Turning to non-GAAP results. Excluding the impact of stock-based compensation expense, amortization of intangibles, and acquisition and integration planning-related fees, we reported non-GAAP operating income of $66.8 million in the third quarter, representing a 29.1% non-GAAP operating margin. As a reminder, margins will fluctuate period to period due to the timing of customer renewals and the resulting impact on licensed revenue recognition in a given quarter. Non-GAAP net income was $69.1 million in the quarter, or $1.06 per share, based on 65.2 million shares outstanding. Turning to the balance sheet and cash flow. We ended the quarter with approximately $286.7 million of cash and cash equivalents. We also fully paid down the $264 million that was outstanding on our term loan balance in the quarter. We generated $131 million of cash from operations and $129.3 million of free cash flow in the quarter after taking into consideration the net impact of capital expenditures and capitalized software deployment pay out payments. On that note, I would like to highlight two factors regarding free cash flow. First, we saw a meaningful impact to cash collections at the end of the quarter due to the Silicon Valley Bank crisis. SVB was one of the primary banks used by our treasury operations to accept customer payments, and it took time to direct customers to other financial institutions. This is entirely a matter of timing. As of speaking, more than half of this cash has already been collected. Second, we no longer exclude acquisition and integration planning related payments from our free cash flow calculation. We have made this change based on discussions with the SEC. Free cash flow presentations for our results this quarter and prior comparable periods have been updated to reflect this change. For the third quarter and year-to-date, this change in methodology impacted free cash flow by approximately 0.8% and 6.9% respectively. I would now like to close with guidance. As a reminder, we expect the current environment from our third quarter to continue through our fiscal, final fiscal 2023 quarter. We are providing these updates in consideration of our progress and learning so far transforming and integrating the OSI and SSE businesses. For ACV, we are now targeting 11%-12% growth for the year. We maintain expectations for approximately 4 points of growth from DGM and SSE, with the main impact coming from the slowdown of chemical industry software spending and other geopolitical considerations impacting Heritage AspenTech. We now expect bookings to be between $1.03 billion and $1.06 billion. This includes $547 million of contracts that are up for renewal in fiscal 2023, and approximately $210 million of contracts up for renewal in the fourth quarter. Total revenues are expected to be between $1.04 billion and $1.06 billion. This includes $670 million-$690 million in license and solutions revenue, approximately $312 million of maintenance revenue, and approximately $61 million in services and other revenue. Relative to our prior guidance, we estimate that 2/3s of this revenue adjustment is being driven by the integration and transformation factors we spoke to earlier, and the final third being driven by our Heritage AspenTech business. As a reminder, revenue in our model can be volatile due to Topic 606. One of the drivers of that variability is the outsized impact of contract duration as revenue recognition is based on TCV, total contract value. For Heritage AspenTech, duration is approximately four to five years on average. For SSE, while duration has remained consistent at approximately one year, our plan assumed that it would begin to lengthen in fiscal 2023 as part of our transformation efforts. This is why SSE revenue contribution will be lower than expected in our fiscal year, even though it is tracking ahead of plan on an ACV basis, which is the key metric for how we manage and evaluate our business. Moving to expenses for fiscal 2023, we expect a total GAAP expense range of $1.219 billion-$1.224 billion and GAAP operating loss range of $179 million-$164 million. GAAP net loss is expected to be between $110 million-$97 million. For GAAP net loss per share between $1.68-$1.48. From a non-GAAP perspective, we expect operating income to be between $398 million-$413 million, for non-GAAP income per share between $5.63-$5.83. From a free cash flow perspective, we expect to generate a minimum of $315 million, and the fourth quarter being our largest free cash flow quarter of the full fiscal year. As noted previously, free cash flow guidance has been updated to reflect the change in calculation methodology. Effective January 1st, 2023, we no longer exclude acquisition and integration planning related payments from our computation of free cash flow. The change in calculation methodology does not represent a change in our expectations. For context, year-to-date acquisition and integration planning related payments represent 4.1% of the sum of our fiscal 2023 free cash flow guide and the year-to-date payments. We estimate that this change in methodology is responsible for roughly 35% of the total decrease in our fiscal 2023 free cash flow forecast using the midpoint of our prior range presented on January 25, 2023. Our free cash flow guidance for fiscal 2023 assumes cash tax payments of approximately $75 million. In terms of synergies, while there are certain objectives that are taking longer than anticipated, as Antonio and I have touched on today, we have made significant progress this year in aggregate. We believe we are well-positioned for the long term from both a growth and profitability perspective, as well as our ability to realize the $110 million of adjusted EBITDA synergies by 2026. To wrap up, AspenTech continues to deliver solid growth and profitability amidst more challenging economic conditions. We remain on track to deliver year double-digit ACV growth and significant free cash flow generation while integrating and transforming OSI and SSE with Heritage AspenTech. We are confident that the progress made in fiscal 2023 has provided us with a strong foundation for accelerated growth and expanding profitability in the years to come. With that, operator, we would now like to begin the Q&A, please. Certainly. One moment for our first question. Our first question comes from the line of Matthew Pfau from William Blair. Your question please. Hi, Matt. All right. Hey. All right, great. Thank you. wanted to first ask on DGM and maybe just a little bit more explanation in terms of what's going on with the sales cycles there. Are they lengthening or they just ended up being longer than you had originally anticipated when you were doing your due diligence on the business? Yes, they are not lengthening. In our, in our, doing our due diligence and our model, we assume that we can bring the sales cycle for the DGM solutions to match or be similar to those of Heritage AspenTech. As we've gotten into that business, we've recognized that a significant portion of their business is tied to government entities, whether it's a municipality, a county, a state, or national government. Therefore, they have very rigorous procurement processes that include request for information, request for proposals, evaluations, and lengthy negotiations. We are realizing that it will take time to bring those sales cycles closer or be similar to AspenTech's. This is something that, you know, many years ago in Heritage AspenTech, we experienced where we do business with a lot of government-owned companies. Over time, as the volume of applications or the install base of applications in these customers' organizations increased, we found ways that these customers also found ways to shorten their procurement processes, eliminate formal procurement processes with AspenTech, leading to sole sourcing awards. The fundamental issue that we determined is that this isn't gonna happen as fast as we thought it could. Therefore, we're readjusting our expectations on how long it's gonna take to close business with DGM. What I just wanna say is that impacts really the outcome that we're seeing in fiscal 2023. For fiscal 2024, we expect to then be in the range of the sales cycle of 12 to 24 months and start to realizing a faster, closing rates and business in the year. Got it. Just one more from me on what you're seeing in the chemicals market. That's an area that you've called out, as, you know, potential area of weakness over the past several quarters. Maybe just help frame, you know, what changed this quarter. What did you see this quarter? Is it a material deceleration there versus what you had been seeing? Yeah, look, as Matt, as we have explained in the past, customers' fiscal year budgets are tied to calendar years. There's no doubt that while chemical customers, back in the middle of 2022 calendar, were having a good macro environment. They started to see a deterioration of their demand environment in the September quarter. Certainly in the December quarter, we believe that impacted their thinking around their operating budgets for fiscal 2023, their calendar 2023. As such, as we got deeper into the calendar into the, our Q3 quarter, the March quarter, we started to see customers resisting and pushing out transactions, which we believe is just a reflection of a much tighter operating budget for software spending. Okay. Got it. Thank you. Appreciate it. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Jason Celino from KeyBanc. Your question, please. Hi, Jason. Hi, Jason. Hey, Antonio. Hey, Chantelle. It sounds like the guidance is changing on the ACV. How should we think about, you know, the Heritage annual spend metric? I know you'll only give it for one more quarter, but, you know, are you providing updated guidance for that? You're talking about, you're talking about the AspenTech guidance? No, the Heritage AspenTech. Heritage AspenTech guidance. The annual spend. The annual spend. Yeah. Yeah. The, you know, I think we stated that we're only giving that guidance at the end of the fiscal year. Yeah. so Jason, we only provide the outcomes each quarter for this year. The guidance for Heritage AspenTech is in the $11-$12, with the approximately $4 being OSI and SSE, the remainder Heritage AspenTech for ACV basis. Okay. Perfect. This quarter specifically, this re-separability on OSI DGM, how much has that contributed to the ACV for this quarter? Jason, we're having a hard time hearing you. He's asking how much of. I, we can barely hear you. He's asking of how much of the DGM separability we've seen year-to-date or so far this quarter. That was your question, right, Jason? Yes. Yes, that is. If you can hear me, yeah, that is. Yeah. No, that was better. Thank you. Yeah. Yeah, look, no doubt that separability was a big win and achievement early in January, and we reported so in the January earnings call. As was mentioned in the prepared remarks, is for the existing OSI project services work. Achieving the project milestones is what leads to our ability to recognize revenue and separate services revenue from the software revenue that is bundled in that project. As those milestones got pushed out and some of these projects that negated the opportunity to take advantage of the separability fact. Nonetheless, that is there for some of the business that we're still recognizing and will continue to benefit us in the future. Okay, great. Thank you. Appreciate it. Yeah. Thank you. One moment for our next question. Our next question comes from the line of Andrew Obin from Bank of America. Your question please. Yes, good afternoon. You guys sort of highlighted geopolitical risk as one of the factors, I was just wondering what that meant, because I think you sort of highlighted, but it's not clear to me what that refers to. Thank you. Yeah. As we've stated in the past, we continue to operate our business in Russia. We've also stated in previous opportunities in investor conferences and meetings that the environment there is getting more difficult for us to transact in because of increasing sanctions on banks primarily, which is constraining the availability then to get payments. Also, there's a more specific push by the local government there to start using more local software or local software. The combination of those factors is leading to less growth and greater attrition in that business, which was reflected as growth in our guidance. That's also an impact that we're seeing in our growth rate. I got you. That makes sense. Just another question. You know, how should we think and sort of I appreciate what happened this year, and I think you've made it very clear what happened. As we think about the path of ACV acceleration and just thinking beyond this year, you know, you did say that it sounds like DGM sales cycle will come in line with your expectations, right? Assuming chemical OpEx will get better and probably the comps are gonna get easier. What should we think about ACV growth accelerating over the next two years? What does today's changing outlook means for sort of longer term outlook for ACV acceleration? Thank you. Yeah. No. Thank you for that question, Andrew. First of all, look, we still have a strong conviction about the thesis for bringing these three companies together, Heritage AspenTech, OSI and SSE. Assuming that we have a steady macro environment across all of our end markets, what we would expect is for the Heritage AspenTech business to perform the way it has performed historically in a normal environment, which is really double-digit growth. We believe that the OSI business is a high growth business in this environment of huge investments in Transmission and Distribution infrastructure and upgrades of their technology capabilities. The SSE business, while it surprised us in on the upside, this year, we would expect that business to return back to a more normal rate of growth, but nonetheless, support what we believe is a rate of growth that is in the mid-teens area for years to come. That's how we see it. I think this year we're dealing with many factors. We see it as a year where we're basically building the foundation to launch an unbelievable business. I think we've made great progress on building that foundation. We've uncovered a lot of things that we were not expecting. We've tested our assumptions. Some of them have turned out to be correct, others have not. On the whole, there's no doubt that we are now much better informed about all the different levers that we have in these two businesses to build and accelerate the growth going forward, supported by what we think is a sustained positive environment for T&D, a sustained positive environment for chemicals. What we think in the medium to short to medium term will be a strong environment for oil and gas, and also refining, and then eventually, with the closing of the Micromine acquisition, a sustained positive environment in the mining area as well. Thank you so much. Thank you. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Rob Oliver from R.W. Baird. Great. Hi, good evening, guys. I apologize in advance. I'm suffering from a little laryngitis here, so hopefully you can hear me okay. I have two questions, Antonio, one for you, and then, Chantelle, I have a follow-up for you. Antonio, it seems like a pretty tight turnaround if by FY 2024 you mean Aspen's fiscal 2024 for the sales cycles to come down on DGM back towards, you know, the core Aspen. Wanted to dig in a little bit more on that. You know, what gives you the confidence given, you know, it's, you know, we're kind of in Q4 right now. I just had a quick follow-up for Chantelle. Okay. No, and thank you for that opportunity because for that question it gives me the opportunity to clarify what maybe I created, a confusion that I created. I don't mean to say that sales cycles are gonna come down to 9-12 months for OSI in fiscal 24. They're still gonna be 12-24 months, but by the time we enter fiscal 24, it'll be 12 months of pipeline building and execution on deals. Another 12 months in fiscal 24 puts us in that range of 12-24 months. We'll start to benefit from the pipeline that we've been building in fiscal 23. I hope that. Yep, that's clear. Okay. No, great. Thank you. I appreciate the clarification. Then Chantelle, one for you, just around the I know what just, you know, broad perspective, you and Antonio have talked about, you know, wanting the predictability in the Emerson assets that you had in the core, you know, Aspen, and I get that that's gonna be a bit of a question today given what's happening with OSI. My question is for you around, you know, the margin side, because I know one of the things you talked about doing to address the potential issues around staffing and projects is to make sure you're accelerating hiring and staff. You know, what is the potential implication for margins or variability, and how can we get comfortable around that variability on the margin side? Thank you, guys, again. Yeah. I think Rob, sorry about your laryngitis. I think there are a few things we're working on that, and we continue to. Our agenda is still clear on what we wanna do in that area. I think the majority of what allows that margin expansion, so if you look at the services business now versus Heritage AspenTech and gross margin, you know, 90%+, what allows that is the evolution of moving to a partner ecosystem where they take on the services, information delivery. We get to be a pure play software, and that's well on track. You know, we've been doing that in parallel. We're growing that, and we're working with second-tier and first-tier partners to scale that and ramp that. That's very much part of our agenda going into next year. The second part will just be, you know, we rebaselined in the hygiene we're putting in as part of our prepared remarks on how we operate going forward. I think those two things, Rob, are very clear, and that's been our continued path and agenda. Great. Okay. Thanks a lot, guys. Appreciate it. Thank you. One moment for our next question. Our next question comes from the line of Clarke Jefferies from Piper Sandler. Your question, please. Hello. Thank you for taking the question. Just a finer point on guidance, I really appreciate you giving a split between how the revenue impact flows through, but specifically on the ACV, if, you know, DGM and SSE are still on track to 4 points of contribution of growth, thinking about Heritage as the sort of difference there, I wanted to specifically ask, you know, how much of it is describable by the chemical end market? You said the word predominantly, I just wanted to be clear about is MSC coming down but, you know, CapEx engineering is going up, so you're still within the range. Is there any way you could maybe further clarify chemicals contribution to ACV movement, you know, given that we're still on track for 4 points with DGM and SSE? Then I have one follow-up. Yeah. Look, we said it in the prepared remarks, the chemicals owner-operators are one of the primary contributors to growth in the MSC suite, because that's where the MSC suite is really used. In Heritage AspenTech, chemicals, represented, I believe about 28% of the total annual spend. I believe today on an ACV basis is about 23% of the total ACV. As such, you know, a slowdown with our chemicals, customers does have an impact on the rate of growth of MSC. If you go back to the, to the previous guidance, the initial guidance for the year, we were guiding MSC from 7.5 to 9.5 points of growth. We've adjusted that guidance to seven to eight. We still think and we still believe that there's MSC will still materially contribute. On a, on a standalone basis, on an ACV basis, we believe that MSC, if you convert it to annual spend to its previous baseline, it'll still be, assuming that we perform the way we expect to perform in Q4 MSC will probably still be a double-digit growth business by the end of the fiscal year. There's been an impact, no doubt about it, nonetheless, that business is still performing well. I believe that business will find ways to also accelerate into fiscal 2024 and will continue to execute. Really appreciate it. Yeah, that's the color that I was certainly looking for. Then, you know, just maybe stepping back, I mean, you had mentioned, you know, input costs, as well as supply chain disruptions as maybe some of the things that were affecting those customers. You know, for us maybe outsiders looking in, is there anything that you'd particularly point to as maybe the main touch point with customers in terms of why they're considering a conservative outlook? Anything that we should be monitoring in terms of the main input to their confidence or their business, looking forward? The one of the main drivers for the drop in demand has been destocking in their, in these customers' businesses. You know, you have to go back to COVID, the COVID years, where a lot of companies stocked up on supplies, considering the environment. Now with, of course, an uncertain macro environment, interest rates and other things, these customers have pulled back in purchasing and are consuming their inventory. That the destocking part of it. What I hear from chemical customers as we attend conference and meet with them is that they believe that destocking is coming to an end, probably most likely toward the middle of this year. They expect to start seeing a growth in demand toward the middle of this calendar year. All right, perfect. Thank you very much. Yeah, you're welcome. Thank you. One moment for our next question. Our final question for today comes from the line, Mark Schappel from Loop Capital Markets. Your question please. Hi, Mark. Mark. Hi. Thanks for taking my question. Chantelle, question for you. I was wondering if you could just review the factors impacting free cash flow that you mentioned in your prepared remarks once again. Yeah, absolutely. You know, they're very specific and very actionable. You know, the free cash flow has three components. One is the change in the if we're taking the change from guidance, it's the change in the methodology. That's about 35% of the change, Mark. The other two, roughly half and half, so a third is OSI and SSE. They're two different drivers. For OSI, it's really the movement of those completion milestones out. That delays the collections and the invoicing and the funds expected from that perspective. From SSE, it's actually just pure execution on collections that we're working through as we bring rigor to the team and working with our customers to get them to the Heritage AspenTech kind of cadence. Those are the three drivers, a third, a third, and a third with three different, three different actions to come up from there. Okay, great. Thanks. I was wondering if you'd just review one more time the factors impacting bookings in the quarter that I think you discussed in your prepared remarks? Well, I had so bookings would be impacted by the renewals, amount up for renewals and contract duration, term length for SSE. Most of my remarks were around the revenue change in the guide. I don't know if you're looking for bookings or revenue, but revenue is mostly the renewals up for discussion and the SSE contract term length that we mentioned. Okay, thank you. That's all for me. Yeah, you're welcome. Thank you. Thank you. This does conclude the question-and-answer section of today's program. I'd like to hand the program back to Antonio Pietri for any further remarks. No, no. I wanna thank everyone for joining the call today, and I look forward to meeting you all as we get on the road over the next few days and weeks. Thank you. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.