All right, we can go ahead and get started. Hello, welcome. My name is Clarke Jeffries, Senior Research Analyst here at Piper Sandler. Incredibly pleased to be joined by Antonio Pietri, CEO of AspenTech. Thank you. Glad to be here. Yeah, perfect. Well, we can maybe kick things off with you know, an overview of AspenTech. You know, there's 43 years in operation, over $900 million of ACV, $300 million plus of free cash flow. How do I get a business like that? You know, what does AspenTech do? What market do you play in, and who are your typical customers? Yeah. Well, I mean, look, like any software company over forty-three years, it's a journey, and you have ups and downs. I like to think that in 2005, when my predecessor came in to turn the company around, did that very successfully. From really 2009 onward, we've built a tremendous platform here in AspenTech. Best-in-class technologies across industrial assets to really drive optimization of their design, optimizing operations and maintenance. And the result of a lot of passion for and the people that we have in the company, for our industries, our customers, and what we do, innovation. Two years ago, we did a transaction with Emerson that brought to us two new businesses in the utilities and upstream oil and gas upstream space, which really have now positioned AspenTech perfectly across the energy transition, in that we can now help our customers not only drive efficiencies and productivity in their businesses, but also resiliency and sustainability, and we're being recognized for that. We've been busy the last two years integrating these two businesses, but we feel that we're now through that, and we're poised now to really start executing against what is a very large opportunity both TAM and value creation for customers. Yeah, perfect. Yeah, and we'll definitely dive into those, the acquisitions and maybe some of the fact that it's a diversification effort from maybe the traditional industries that you had. Yeah. But let's talk about, you know, you've historically had very significant market share in EPC, petroleum, chemicals. You know, let's talk about the sectors today within, you know, the core heritage business. You know, what offer the most compelling growth opportunities, and what are you most excited about, you know, from a sector perspective in 2025? Yeah. So our traditional industries, refining, chemicals, EPCs, engineering, procurement, and construction companies, the opportunity there really has always been driving more efficiencies in these businesses. I mean, that's been the number one priority, creating value, helping them with their top line and profitability. Of course, since the declaration of net zero carbon ambitions by a lot of these companies, they've put in place strategies that are also driving them to reduce their emissions, moving to new businesses that are more sustainable, biofuels, hydrogen, carbon capture and sequestration, and that's creating a new opportunity for AspenTech. The beauty of what we do is that those same products that were created to drive those efficiencies and capture that value are the same products that are used to drive sustainability. The molecules that we've modeled to drive efficiencies are the same molecules that we can model to drive less emissions, produce biofuels, produce hydrogen, so a whole new opportunity is being created with very little investment from our side. It's just new use cases on how our software is used to capture reduction in CO2, or produce biofuels, or design the chemistry in electric batteries, because today, Tesla, Rivian, Japanese electric vehicle manufacturers, are customers of AspenTech, and that's opened up a whole new TAM for us, which also has us very excited. Yeah. Well, maybe we can talk about, you know, the sustainability, and certainly, this was a big topic during your user conference earlier this year. Maybe we can talk about what the competition is like. You know, for those traditional industries considering some of these sustainability investments, like sequestration or, you know, biofuels, you know, what does the field of vendors look like that? Are they really struggling to find a solution that helps them in the way that Aspen did in their traditional process? You know, let's just talk about- Yeah ... the competition. Yeah, no, look, it in a way, what happens is that our software is a combination of physics, chemistry, math, optimization, domain expertise, and it's industry expertise, but also chemical engineering, electrical engineering. So it's not easy to sort of replicate. The barriers to entry are very high. And then when you have an opportunity like sustainability, while you might have some venture capital backing a new startup on artificial intelligence to try to use AI to replicate some of our capabilities, that's a very long adoption cycle for those companies. In the meantime, our customers can immediately use that same knowledge that they have about using our products and apply it to sustainability use cases, and that's the acceleration that we see in the use of our software. Now, we've also been, over the last 10 years, integrating AI capabilities in our products. Our approach to artificial intelligence is not, "Let's create pure AI applications," it's more, how do we leverage those AI capabilities, whether they are, machine learning algorithms or expert systems, large language models? How do we integrate that into our products to enhance the capabilities of our products and deliver AI to our customers that way? Which is, in a way, the safest manner to do it, because, the first principles of engineering, it's what will provide the guardrails and the rules of the road for AI, and customers are accepting that. We think we've built, over 40 years, a great platform that we can continue to enhance for different use cases or for new technologies that will deliver more value to our customers. Do those sustainability opportunities present as a, you know, a contract opportunity to you that's very equal to your core business? You know, when you think about those sustainability investments, do they move the needle? Are they- Yeah ... almost equal in size as, you know? Yeah. And look, we're in the process of. I mean, we have a better understanding of the potential TAM for sustainability. We're still in the process of refining what that TAM is, but certainly over the last couple of years, we believe the contribution to growth from sustainability is it's been in the ballpark of around 15%-20% of our growth has come from that. I think the opportunity over time will be larger. In a way, we need to understand that the transition to a new energy system that is more electrical will require that we maintain what we have in the meantime, while we build a new economy that is an electrified economy. So you have the benefit that we see is that we'll see the CapEx and OpEx that is required to maintain that economy there, but new CapEx around sustainability and both. And OpEx that will be put to work to create this new economy relying on a different energy system, and that will be a benefit for the next 10 to 20 years. This is also an opportunity for the company. Yeah, absolutely. I wanted to maybe go back to where you were, you know, saying you were embedding AI in the platform. You know, when we think about process-related industries and the physics and the math, you know, where is the most of the product innovation happening? Where is there product innovation that excites you? Just for frame of reference, if we're not familiar with, you know, heavy assets that are- Yeah ... doing this kind of calculation, like, where- what does that product innovation look like in this, in this sector? The thing about these industrial assets is that they're very, they're very complex to operate, they're very dangerous to operate. If something goes wrong, you could have an explosion, an accident that could injure or kill people. So these customers are very, very conservative on the adoption of technology. They wanna make sure that it's well-tested, it's proven, and it won't cause any issues. This is why we believe that integrating AI within our existing products, it's an acceleration for the use of AI. Now, even though we've been trying to model these these assets and optimize them for 30, 40 years, there are still areas where first principles of engineering are, is not able to model the very complex dynamics on a reactor, where there's a lot of chemistry and physics happening. But because those reactors are very complex, they're highly monitored. So the opportunity exists to then use artificial intelligence and use all that data to model the reaction in those reactors, and then integrate that as an object into a flowsheet, first principle flowsheet. This is a little technical, but that improves the accuracy of the models, it improves the predictability, and therefore it creates more value for customers. Today, our pipeline of AI projects, meaning the integration of AI capabilities in our products, is over a hundred and fifty different ideas that eventually most of them, a lot of them, will turn into capabilities in our products. So in a way, we're looking to enhance the capabilities, increase the ease of use of our products using artificial intelligence, and the accuracy and predictability of these products. Yeah, certainly. Maybe to talk about the market environment and then the macro environment. I think what's so interesting and exciting about the sustainability is this, this seems like a secular trend. Yeah ... where there can be Yeah ... a passive level of CapEx through cycles. But if we talk about the cyclical part for a moment, maybe as a frame of reference, you know, most of your customers, are they wrestling with demand or capacity issues in their business? You know, have they been sitting on the sidelines and not deploying CapEx because of the capital environment, or are they not operating their assets at full capacity because the demand environment is not- Yeah ... suitable? Maybe we can think about what might transpire over the next, you know, several months and years on a cyclical basis. Yeah. Well, I mean, look, so we are now into five industries: Oil and Gas, Chemicals, EPCs, Utilities, and Mining, and they all have their own dynamics. The oil and gas industry is upstream, midstream, and downstream, which is different dynamics for each of those sectors. For the most part today, most of our industries have solid demand, and it's about, you know, supplying, meeting that demand, supplying that demand. Chemicals, though, is a little different in that chemicals has been in a downturn for a couple of years. That downturn has come about because of the overstocking that happened during the pandemic and after the pandemic, and now a destocking over the last two years. But also, as the Chemicals industry does, as demand ramps up and they see increase in demand, they start building new assets, so the Chemicals industry is suffering from a lack of demand because of destocking and overcapacity, and this is why this downcycle, this trough, is a little more elongated than historical ones, but look, we're hearing from some customers that they hope 2025 they'll start to see better demand and therefore start driving better revenue and profitability, but we're also hearing, though, that after two years of very lean investment, they feel like they need to get back into the implementing digital technologies and capabilities to make their assets more efficient as well. Certainly. And that was an industry that you would expect over the long run to still be adding capacity- Yeah, totally. Compared to, say, you know, energy transition that might be- I mean, look, the expectation that between now and 2050, the chemicals industry demand will increase by 300%. Everything that we interact with on a daily basis has products that are derived from chemicals, and most of that from oil or gas, by the way. So as we become more sophisticated as a world, and the standard of living is increasing, that will drive greater consumption of products which are built or manufactured using components that come out of chemicals. Mm-hmm. Absolutely. Well, you know, we've done a good job overview on the market and some of the high-level themes. Let's maybe talk about, you know, initiatives in the company that you've been doing over the last few years. Certainly, the asset transformation and some of the acquired businesses, but also go-to-market changes. So maybe we could recap, you know, the recent efforts to expand the sales team, where that was and, you know, what solutions did you look to add, net headcount versus transformation opportunities and how you went to market? Yeah. Yeah, so with the Emerson transaction, we basically doubled the headcount of the company from 2000 - 4000 employees. Our annual contract value, it wasn't exactly double because one of the businesses was mostly perpetual software licenses. So we've had to certainly create a new platform for 4000 employees, systems, processes, talent, especially talent. A lot of new talent in the company. But also then, we've had to transform two businesses. The Open Systems International business, which is our Digital Grid Management business today, was run as really a perpetual license business, 50% services. We wanna have services be less than 10% of our total revenue. So we've been transforming that business into a term software licensing business, our token licensing model, putting in place best practices of a software company, and the talent to run that business as a software business. While we're also building an implementation services partner ecosystem for that business, so that third parties are implementing the software as opposed to AspenTech, which is a way of lowering long-term the amount of services in our P&L. And then the SSE business, which is the other business from Emerson, the Subsurface Science and Engineering business, great business. They had already converted it to term, but the commercial agreements between customers, them and their customers, were not what we like to think of as a software license agreement. So the transformation there is around the commercial relationship between customers and AspenTech. A lot of legacy SMS associated with perpetual licenses when they sold them. So we've had to, in a way, put in place practices and processes to also, in a way, to drive discipline with our customers on those customers on renewal of agreements, the commercial relationship between the two companies. And actually, I've been pleasantly surprised at the progress that we've made in that area. Most of the customers with the longest agreements were about three years, so we know that by the end of this fiscal year, we'll be done with this. And we've introduced a token licensing model. The penetration of that model has been very accelerated because these customers see the benefit of that. We've had to put in place a new sales organizations for the DGM business. It was a North American-centric business. We're expanding into Europe, we're expanding into Asia and the Middle East as well. So no lack of activities and initiatives to transform these two businesses, and look, the last two years have been hard. A lot of work, it's happened, and my team has done an unbelievable job, and now we truly, you know, we've had to, we've had to write off and get out of Russia, get out of Russia and write off that business as well. That's the last piece that happened in Q4. But now we feel that after all of these, which is really the opportunity, the integration of these two businesses and the relationship with Emerson was not about the last two years; it's about the next ten, twenty years. So we've had to do this job, this work of transforming these businesses. But what has me excited is now about the opportunity to capture the opportunity that we have in front of us; it's now about execution. I think we have a team now that is well aligned, understands how we can do this, and drive this company forward. We've taken care of Russia; that's out of the way, and now it's all, you know, what I hope is clear sailing to accelerate on our speed. Yeah, certainly. The summary being all in service of ACV growth, you know. Yeah. All in service of- Yeah ... putting in the right revenue recognition to those businesses and having a you know a clean model for us to appreciate- Yeah From the outside looking in. Yeah, at the moment, and just a clarification, there's a gap. I mean, our revenue is about $1.1 billion. The ACV, annual contract value, is about $930 million. So that gap is really services revenue and other consulting. And this is why we, over time, will reduce the amount of services revenue so that ACV and revenue are more or less aligned, which then is what that'll be the growth rate of the company going forward. Yeah, absolutely. Let's talk, let's talk about DGM. I mean, obviously, you know, a very interesting growth opportunity, you know, nearly 40% of growth in the past year. You know, maybe let's talk about an overview of what that business is, why it's growing so much, and what does that market look like? Yeah In terms of potential customers? So the Open Systems International business was sort of a new entrant into the software landscape in utilities. A space that had been dominated by traditional industrial companies, ABB, GE, Siemens, Schneider. They came in 30, 25 years ago, started to develop contemporary new software with latest technologies. Eventually, there was been an inflection point in that renewables started to get introduced into the grid, and that creates complexity. The intermittency of renewables, also consumers becoming producers of energy, rooftop solar, and instead of one-way flow on the grid, it became two-way flow. All of these led all these utilities to recognize that they needed to operate their system, the system that they use to manage and operate the grid. This created an opportunity for OSI, and now AspenTech, to start then displacing competitors, because the technology is actually seen as best-in-class around transmission, what's called generation management and energy management, the transmission of electricity. In that process, a very North America-centric business, OSI, and now AspenTech, the last two years, we've managed to get about 40%-50% of the utilities in North America to use our technology. You know, the entire Southern California grid is managed by AspenTech. Exelon, that has five different utilities now aggregated into one company, uses our technology as a standard. The entire grid of India is managed by AspenTech, transmission grid. Pretty soon, Mexico will come online with new systems from AspenTech, and we'll be managing the third transmission network of Mexico as well. So this contemporaneous technology that is best-in-class around managing that complexity from renewables, more cyber secure, is driving the adoption of DGM. At the same time, the team has done a great job developing applications that sit on top of those systems: distribution management, distributed energy resource management systems, outage management. So there's a second motion of sales after we install those base systems, which is new apps on the base system, which drive additional growth. And it was a North American-centric business. 85% of their business was in North America, so the opportunity for us is to expand into Europe, into the Middle East, other parts of the world, Asia, Latin America, and we've been doing that. And those are part of the investments that we've been putting in place the last two years, and they're starting to pay off. So the growth is being driven mostly out of North America over the twenty-five-year history of that business, but now we'll start to benefit from growth out of Europe, out of Latin America, Asia, the Middle East, where there's a lot of opportunity because the dynamics are exactly the same: global electrification everywhere, expansion, complexity, and cybersecurity. All right. Perfect. Well, coming in in the last few minutes, I wanted to briefly touch on Emerson and the commercial agreement. You know, another announcement from the conference was integrated products- Mm-hmm Some early releases. Just briefly, you know, what does the active opportunity look like for more integration with Emerson? Is there still work to be done in terms of the commercial agreement coming online? Maybe just- Yeah ... briefly touching on that. Let me look at, and I'll be brief. A commercial agreement, I think, we've learned a lot the last two years, and now all the pieces are in place to really begin to accelerate the benefit from that commercial agreement with Emerson. On the innovation side, the great benefit is that Emerson has a vision that is very aligned with our own vision, and in a way, their vision supports our long-term vision. The opportunity here is for Emerson and AspenTech to develop a new stack of technologies, where our software is native to Emerson systems. And what you'll have in the market is an offer that from the control systems in a plant through to the optimization and sustainability opportunities can be outsourced from one integrated company, Emerson, AspenTech, from an ownership standpoint. It will take time to get there because, you know, innovation cycles can be long, but this is a vision and the opportunity. AspenTech will continue to remain agnostic, in that our software will be able to sell to anyone that's using a Honeywell or a Schneider system, but the Emerson AspenTech solution will be seamlessly integrated native to each other, and that will represent more value as well for customers. All right. Well, perfect. Thank you, Antonio, and looking forward to the Investor Day next week. Yeah. We're very excited. Everyone is invited. We're hosting our Investor Day next week in Burlington, Massachusetts, about five minutes from our headquarters, and you know, our goal will be to bring a lot of clarity to our strategy, the opportunity that is in front of AspenTech, and how we plan to capture that opportunity, and why AspenTech. All right. Thank you. Thank you. Appreciate it.