Good day, and thank you for standing by, and welcome to Q4 2023 Aspen Technology Earnings Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to introduce your host for today’s call, Brian Denyeau from ICR. Your line is now open..

Thank you, operator. Good afternoon, everyone, and thank you for joining us to discuss our financial results for the fourth quarter and full year of fiscal 2023 ending June 30, 2023. With me on the call today are Antonio Pietri, AspenTech’s President and CEO; and Chantelle Breithaupt, AspenTech’s CFO.

Please note, we have developed an expanded earnings presentation for the fourth quarter and our fiscal year 2023. This presentation is now posted on our IR website, and we ask that investors to refer to this presentation in conjunction with today’s call. Starting on slide 2.

Before we begin, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements.

Factors that cause these results to differ materially are set forth in today’s press release and in our annual report on Form 10-KT, other subsequent filings made with the SEC.

Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this presentation, we present both GAAP and certain non-GAAP financial measures.

A reconciliation of GAAP to non-GAAP measures is included in today’s earnings press release and investor presentation, both of which are available on our website. With that, let me turn the call over to Antonio.

Antonio?.

one, our ongoing investment in DGM sales capacity, including our international sales team; two, increasing demand in the market as funding to upgrade and expand electrical grids continues to grow; and three, the benefit of a full year of DGM customers adopting our term license offering. Turning to SSE.

We are pleased with its underlying performance in fiscal ‘23 and the future growth opportunity for this suite.

SSE is benefiting from increased investment in traditional upstream CapEx, a growing number of opportunities to support our customer sustainability efforts in areas such as carbon capture sequestration and geothermal energy, among others, as well as the benefits of AspenTech’s tokenization model.

Having said that, it is important to note that a significant portion of SSE’s outperformance in fiscal ‘23 was due to the positive impact of a transformation synergy that was a onetime in nature. As customers renewed or signed new agreements that align with Heritage AspenTech’s standard contract terms and conditions.

SSE contract duration at the time of the Emerson transaction was approximately one year which means we have renewed almost all of its existing contracts and largely capture the impact of this transformation initiative.

There remains an important transformation synergy in the SSE business which is the conversion of a large base of legacy perpetual SMS ACV to term software ACV, which will begin to convert in fiscal ‘24 by leveraging the SSE token suite. We expect this to materialize over a multiyear period.

Overall, SSE’s 1.5 points of expected ACV growth contribution equates to a mid-teens SSE ACV growth rate, which compares favorably to our expectations for this business when we announced the Emerson transaction. With that, I would now like to turn the call over to Chantelle before I return for closing remarks.

Chantelle?.

Thank you, Antonio. I will now review our financials for the fourth quarter and for the full year of our fiscal 2023 on slide 10. Before I begin, I’d like to highlight that our earnings presentation includes explanations regarding the impact of ASC Topic 606 on our financial results.

We have also included definitions of annual contract value or ACV and bookings in our earnings presentation now available on our IR website. We ask that investors refer to these definitions together with today’s call.

As Antonio discussed, annual contract value was $884.9 million at the end of fiscal ‘23, up 11.8% year-over-year and 3.5% quarter-over-quarter. This was at the high end of our outlook for fiscal ‘23, reflecting our portfolio expansion, solid growth across our product suites and resilient demand in most end markets.

Customer attrition was 5.9% in fiscal ‘23, beating our guide of 7% to 8%, mainly due to benefits from transformation efforts in SSE and secondarily, focused customer success efforts on EPC customers to mitigate reduction in spend.

Annual spend for Heritage AspenTech was approximately $730.9 million at the end of fiscal ‘23, increasing 8.5% year-over-year and 2.7% quarter-over-quarter. Please note that we will not be disclosing annual spend for Heritage AspenTech going forward, now that we have finished the fiscal year.

Total bookings was $380 million in the fourth quarter and $1.08 billion in fiscal 2023, above the high end of our guide. As a reminder, bookings are impacted by the timing of renewals. Total revenue was $320.6 million for the fourth quarter and $1.04 billion for fiscal 2023 within our guidance range.

As a reminder, revenue in our model is heavily impacted by contract renewal timing and variability under ASC Topic 606. Now turning to profitability. On a GAAP basis, operating income was $6 million, while net income was $27.3 million or $0.42 per share in Q4.

For fiscal ‘23, operating loss was $183.1 million and net loss was $107.8 million or $1.67 per share. On a non-GAAP basis, operating income was $148.9 million in Q4, representing a 46.4% non-GAAP operating margin. For fiscal ‘23, non-GAAP operating income was $394.8 million, representing a non-GAAP operating margin of 37.8%.

Related to my comment on revenue on Topic 606, the timing of customer renewals and the resulting impact on license revenue recognition in a given quarter also drive fluctuation in margins between periods. Expenses came in slightly higher than our guide due to an increase in bad debt expense driven by one customer.

Non-GAAP net income was $138.2 million in the quarter or $2.13 per share. For fiscal ‘23, non-GAAP net income was $372.1 million or $5.72 per share. Turning to the balance sheet. We ended fiscal ‘23 with approximately $241.3 million of cash and cash equivalents and no debt.

In addition, we had $193.1 million available -- dollars available on our revolving credit facility. On cash flow, we generated $113.6 million of cash from operations and $111.5 million of free cash flow in Q4. For fiscal ‘23, we generated $299.2 million in operating cash flow and $292.3 million in free cash flow.

This was below our expectations due to lower collections. As we have discussed in the past, Heritage AspenTech has a disproportionate amount of its receivables due on June 30th. This year, we saw a greater portion of these invoices pushed out of the quarter as certain customers took longer to pay than they have historically.

We received a significant portion of these payments in July. We believe this reflects certain customers being more cautious as they manage through a tighter working capital and cost of capital environment.

Tightening our collection processes and improving the rigor of our collections forecast across the entire business is a primary area of focus for us in fiscal 2024. Before turning to guidance, I would like to take a moment to discuss our capital allocation strategy, which we have outlined on slide 11. I’ll begin by providing an update on Micromine.

In collaboration with Potentia, Micromine’s majority owner, we have terminated our agreement to acquire Micromine. As stated previously, we have been waiting to secure final regulatory approval. The outstanding approval needed was from the Russian government.

As its review process continues, the timing and requirements necessary to secure the approval became increasingly unclear. This lack of clarity on the potential for and timing of a successful regulatory review led us to this course of action.

We remain committed to acquisitions, including smaller technology tuck-ins or larger more strategic targets as our primary use of capital. We have built one of the world’s leading industrial software businesses, and we believe we are in a great position to deepen our product portfolios for our core verticals through M&A.

In addition, we will opportunistically pursue acquisitions that provide us with leadership positions within new markets that could further benefit from our deep technical capabilities and first principles approach. Importantly, we have strengthened our internal M&A capabilities to execute on additional M&A as part of our strategic road map.

I would note as well that despite the decision to terminate the Micromine transaction, the metals and mining industry remains an attractive market, particularly for our DGM, MSC and APM suites, and we remain committed to expanding our footprint in this industry through organic and inorganic investments.

If we do not identify attractive and actionable M&A opportunities, we will pursue share repurchase authorizations if market and business conditions warrant. For example, in Q4, we announced a $100 million accelerated share repurchase program that we anticipate completing this quarter.

And today, we are announcing that our Board of Directors has approved a $300 million share repurchase authorization for fiscal year ‘24. Once the ASR is complete, our intention is to begin executing on this new authorization. We maintain a robust financial profile with a strong balance sheet and healthy cash flows.

We consider these to be strategic assets, and they allow us to deploy capital in ways that generate value for our customers, employees, the communities we serve and our shareholders. Turning to slide 12. I would like to now close with guidance. Consistent with prior fiscal years, we will continue to provide guidance on an annual basis.

As Antonio mentioned, we are targeting total ACV growth of at least 11.5% year-over-year in fiscal ‘24. This includes our expectations for attrition of approximately 5% with a higher concentration of attrition occurring in Q2 and Q3.

We expect total bookings of at least $1.04 billion with $580 million up for renewal in fiscal ‘24 and $80 million up for renewal in Q1. We expect total revenue of at least $1.12 billion, GAAP net loss at or better than $7 million and non-GAAP net income of at least $424 million.

In addition, we expect GAAP net loss per share at or better than $0.11 and non-GAAP net income per share of at least $6.51. This includes the impact of our fiscal ‘23 share repurchase program. From a cash flow perspective, we expect operating cash flow of at least $378 million and free cash flow of at least $360 million.

Please refer to our earnings release and presentation for a complete overview of our fiscal ‘24 guidance. Our earnings presentation presents other important considerations for investors to think about in terms of modeling our business. I’d now like to provide some additional color on these points.

In general, our business is typically weighted more towards the second half of the fiscal year. For ACV, we expect fiscal ‘24 growth to have a similar cadence to what we delivered in fiscal ‘23 -- in fiscal ‘24 to ‘23 in terms of our net new ACV added during the year. Q1 is expected to be the lowest and Q4, the highest in terms of net new ACV added.

On free cash flow, the large majority of our free cash flow typically occurs in the second half of the year. In fiscal ‘24, we expect at least 80% of free cash flow to occur in the second half of the year which is largely consistent with last year’s linearity. We anticipate free cash flow in the second half to be fairly evenly split between Q3 and Q4.

Please note that Q1 is typically our lowest free cash flow quarter and we expect that to be true again this year. Our guidance assumes cash tax payments of approximately $125 million. With respect to revenue, as noted earlier, timing is more variable due to the impact of 606.

However, renewals, which heavily impact license revenue are generally more weighted to the second half of the year, with Q1 renewals at the lowest and Q4 renewals at the highest. Based on current expectations, we anticipate that our revenue linearity will be broadly similar to fiscal 2023.

We will continue to disclose the amount of bookings up for renewal each quarter. Let me wrap up by saying that we are proud of what we have accomplished in fiscal 2023. I am confident in our team and our ability to capitalize on both existing and emerging growth opportunities going forward.

With that, I will turn it back to Antonio for his closing remarks.

Antonio?.

Great. Thanks, Chantelle. We’ll be opening up the call for Q&A momentarily. But before we do that, I want to reiterate the key takeaways from this call and fiscal ‘23 more broadly.

First, we delivered a solid year in fiscal ‘23, delivering double-digit ACV growth and laying the foundation for the expansion of ACV growth and free cash flow margins in the coming years.

Second, we made great progress integrating OSI and SSE with Heritage AspenTech and made a strong progress on our ambitious transformation road maps for both the OSI and SSE businesses. I’m confident our efforts this year position us for success in fiscal ‘24 and beyond.

Third, sustainability is a sizable and growing tailwind across every area of our business. We are in a great position to capitalize on increased investment from customers in areas like energy transition and electrification for years to come.

As we look ahead, we expect to build on our leadership in sustainability as a key driver of our strategic priorities. And finally, we entered fiscal ‘24 with solid momentum, a cutting-edge technology stack and long-term vision for our solution that is very compelling to our customers.

A big component of my confidence in our ability to deliver on these outcomes is also the incredibly talented team we have at the helm of new AspenTech today. We entered the year with the right people, processes and products in place to take full advantage of the opportunity in front of us.

With that, operator, we would now like to begin the Q&A, please..

[Operator Instructions] And our first question comes from Rob Oliver from Baird..

Thank you guys for taking my question. I appreciate it. I had two. One, just to start since it’ll probably be the last time we’re going to be able to ask about it, which is the Heritage AspenTech component of the guide, which I’m going to miss.

Antonio, I appreciated your color around some of the moving parts within that, and it looks like it’s relatively flattish with this year. Can you just give us a sense of what linearity was in Q4 with your chemicals customers? And I know things dropped off pretty dramatically there.

So when you say, "Hey, we’re not expecting any change in the market." Is that off of sort of that low base you guys saw last quarter? Help us understand that and maybe some of the other moving parts within that. And I just had a quick follow-up..

Well, I mean, look, the fourth quarter was a solid quarter for HAT growth. That supported the eventual outcome that we got. Nonetheless, as you said, the growth for HAT in fiscal ‘23 was similar to fiscal ‘22, around 8.5%. And that is a result of a combination of factors, certainly chemicals.

Now that chemicals completely disappeared, but probably from a growth standpoint, it contributed less than half of what it normally does. There was a little bit of back and forth throughout the year in our Russian business. And we had a quarter where China was fully closed down as well. And look, ultimately, fiscal ‘23 was an incredible year.

A huge amount of work was accomplished in integration and transformation. They had a leadership team had to take on the integration and transformation of the OSI and SSE businesses. And I have no doubt that a lot of their brain cycles were dedicated to that effort as opposed to the normal execution cadence that we have in the company.

Now that we’re past that, I am convinced that we’re going to get back to that execution cadence going forward which is what encourages me about our guidance for fiscal ‘24 in line with what we accomplished in fiscal ‘23, at least what we did in fiscal ‘23..

Okay. Very helpful. Thank you, Antonio. I appreciate it. And then, Chantelle, just to quickly touch on some of the issues around the acquired assets at the SSE and DGM that surfaced last quarter. It sounds like you guys are on the path to fixing those and I guess, particularly on SSE around contract durations and DGM around labor-related issues.

Can you just help us understand where we are relative to those as we enter FY24?.

Yes, happy to, Rob. I would say we’re exiting FY23 with confidence that we fully understand the learnings and have incorporated those. So, we’ve taken the exit out of ‘23, incorporate that into our ‘24 guide, learning from SSE, learning from DGM and OSI.

So Rob, we’ve fully taken those learnings and incorporated them and we’re confident that we have our hands around those in our ‘24 guidance..

What I would also add to Chantelle’s answer, Rob, is, look, we’re now entering ‘24 with the leadership team, the organization, the systems and the processes in place. That’s what we worked in ‘23. ‘24 is about execution now, and that’s what gives us a lot of confidence..

And our next question comes from Andrew Obin from Bank of America..

Just historically, you guys sort of provided your guidance within 3 percentage points.

So, this 11.5%, am I correct to assume that that’s sort of the low end of the guide? I just want to make sure, right, versus the midpoint of the guide, the way you would historically guide, right? Does that make sense, what I’m asking?.

Yes. You should assume that the 11.5% is the floor for our performance in fiscal ‘23 -- fiscal ‘24. Sorry..

Got you. That sounds good to me. And then on DGM, just we’ve heard from some of your competitors that utilities just generally as you transition the license structure, they have to figure out how to incorporate it into their base rate. Can you just talk about it? And it seems it’s not right, it’s not just an Aspen issue.

It’s like other competitors have sort of highlighted that as well. Can you just talk to us where we are in terms of sort of industry acceptance as you go away from perpetual license model, was utilities -- regulated utilities customers.

Just give us a little bit more color how much work has been done, what’s the understanding level in the industry? It sounds like you guys have done some, but just maybe a little bit more color. Thank you..

Yes. Well, Andrew, I believe one of the comments that we have on our prepared remarks is also how pleasantly surprised we are about the early receptivity to our term licensing model by utility customers. Frankly, we had that same belief that you just communicated at the beginning of the fiscal year and listening to the OSI team.

But as we approach these customers with term licensing, the benefits of it and even some preliminary conversations around the token suite, we’ve seen them to be very accommodated. No doubt that they have to find ways to build that cost into their cost rate. They do go through those motions. A lot of them do.

It has allowed us to do some term business or new pipeline that has closed early on. But also, we’ve been able to convert on pipeline that is being on a perpetual license basis, to term license business at the very end of those deal negotiations.

So, yes, we understood that to be the case, but the fact is that our sales motion is proven to be otherwise in most cases. No doubt, there are some customers that prefer perpetual, but this is a transition and the progress we’ve made, we’re very pleased with..

And our next question comes from Matthew Pfau from William Blair..

First, I wanted to you ask on acquisitions, and thanks for an update on the capital allocation strategy.

But specifically on acquisitions, what does the pipeline look like there for larger transactions like the Micromine one, are there attractive ones that are out there? And how soon would you be willing or feel that you’re ready to pursue another transaction, similar size to Micromine?.

Yes. I think that I can start, Matthew. I think from the perspective, we definitely have a pipeline. We have an active pipeline that we’re always looking at as being part of our capital allocation strategy. There are targets out there that are of interest. Unfortunately, you can’t always time when you would like to do it versus when they’re available.

As I mentioned in my prepared remarks, we’re ready to do that activity when it presents itself. We’ve developed the internal M&A activities. We have the balance sheet to support it.

So, I think we’re ready when we find it, but we remain disciplined as we’ve always discussed in the sense that we want to make sure it is accretive for support double-digit ACV growth at our best-in-class profitability. So, we’ll time it when it’s available, but we’re ready to still engage in it..

Okay. Great. And then just wanted to follow up on comments around the Russia business.

Is there any of that lap that is included in the fiscal ‘24 guidance? And is there any risk around that part of the business?.

Yes. Look, our guidance of 11.5% certainly accounts for chemicals, accounts for other potential eventualities. But on Russia, due to the different challenges that we’ve been facing in that market, we decided to go to a renewals-only model. So that means that we’re not going to be selling anything new into Russia going forward.

We will be focusing on renewing the existing business, and that’s going to be our focus. So our guidance already implies that we will not see any growth from Russia.

And we’ve also taken a little bit of a conservative approach with respect to potential attrition in Russia although we expect to renew the business that’s coming to us in fiscal ‘24, we’ve been cautious and assume some level of attrition in Russia as we try to renew some of that business. So, going forward, AspenTech will only be renewing business.

We will not be selling new entitlement to Russian customers..

And our next question comes from Jason Celino from KeyBanc Capital Markets..

Thanks for fitting me in. No, really, really strong guide here with a double-digit ACV guidance. I think you mentioned on Andrew’s prior question that this was kind of the floor.

I guess, how conservative do you think investors should view this type of ACV outlook?.

Well, look, it’s -- if we give you that guidance of 11.5% being the floor is because we’re confident about that number. If you look at the ACV growth in fiscal ‘23 and the attrition 11.8% plus 5.9%, that’s about 17.7% of gross growth, new growth in fiscal ‘23 at a very strong outcome from a new growth, new business generated in fiscal ‘23.

In fiscal ‘24, if you look at the guidance of at least 11.5% and the attrition at 5%, approximately 5%, that 16.5%. So, what you see in our guidance is the expectation of chemicals for the full year not contributing. We had half a year of strong contribution from chemicals in fiscal ‘23.

We’re assuming that chemicals will be subdued in the full year in fiscal ‘24 in there less Russia growth or no Russia growth and so that’s how we come out to the 11.5%. If you look at our guidance as well on the suite -- on a per suite basis, you look at -- HAT delivered about 8.5% growth in fiscal ‘23.

We’re taking approximately close to double-digit growth in fiscal ‘24. OSI grew 30% in fiscal ‘23, we’re guiding to almost 40% growth for the DGM suite -- sorry, I should have said DGM in fiscal ‘23, 30%, 40% in fiscal ‘24. And SSE grew by 33% in fiscal ‘23, and we’re guiding to about 14%, 15% growth in fiscal ‘24.

And this is solid growth across all suites because we’re assuming -- we saw in Q4 a solid contribution to growth from DGM. We were conservative in our Q3 outlook for DGM considering that we were still learning around the dynamics of customers’ motions to sign deals, but we’re pleasantly surprised in Q4 with that outcome.

So overall, look, we feel good about the trajectory for HAT in fiscal ‘24, the trajectory for DGM, the trajectory for SSE. We’re going to have a greater focus on our execution and now it’s about really injecting more momentum into the business as we go forward..

And then maybe just a quick follow-up for Chantelle on the free cash flow for the year and for next year -- for the quarter. You mentioned some timing differences just on invoicing. That makes sense.

Any way to quantify what moved from Q4 to Q1?.

No, I understand the question for sure, Jason. I would put it at basically the difference between the actual and the guide would be the range that I would carry in. And then in our guidance, assume that some of that continues through the year. So [Technical Difficulty] Q4 has done. But you can say the range to the actual would be what I would assume..

And our next question comes from Clarke Jeffries from Piper Sandler..

I really appreciate the disclosure on ACV growth contributions, especially by industry. Antonio, maybe I would clarify something that you briefly mentioned in the prior question.

But -- when we think about Heritage AspenTech getting back to double digits, where would be the delta there? Was it chemicals was half the contribution that you normally expect? Any other call-outs when we think about industry contribution overall Heritage returning to that double-digit level?.

Yes. No, look, I think fundamentally, our energy industry, refining, it’s been a strong contributor. Certainly, that will be the case. Engineering accelerated to almost 8.6% growth in fiscal ‘23. By the way, that’s the fastest growth rate of our engineering business since fiscal ‘14 when we grew just over 10%.

So, we’re really excited about the tailwinds for the engineering business from sustainability investments. I think that will continue in fiscal ‘24. We believe that MSC will continue to perform strongly. There are some products in MSC that the performance we expected as a result of execution focus in fiscal ‘23, that focus will come back.

I think that will give us a lift in the same markets, refining even upstream that is taking out some of -- more of those technologies. And APM sort of similar contribution. So -- but look, I think MSC will be about focus on execution in fiscal ‘24..

Perfect. And then a follow-up for Chantelle. One thing that stands out to me is the bookings number for next year.

Just wondering if there were any early renewals, anything that contributed to bookings this year being above the high end of the guide that you had for last quarter for full year bookings? Any other mechanics that would lead to the bookings number being down year-over-year for fiscal ‘24?.

Yes. I think that in the sense of some of the prepared remarks you’ve heard driving the bookings for this year would be the achievement of the term length for HAT, I think that we look at what we’ve achieved in DGM. So, I don’t think there’s anything mechanical. I think it’s just the mix of business and timing of the renewals is the key factor.

So, I would put around more of the timing of the renewals than anything more specific than that..

And just one more thing and for everyone, if you look at the presentation, the slide deck that we posted, if you look at slide 16, it has all the ACV dollars by suite over the last three years, which will allow you to calculate the growth rate for fiscal ‘23 instead of having to remember what I said..

And our next question comes from Josh Tilton from Wolfe Research..

The first question that I wanted to ask is kind of revisiting the question that I think was sort of asked about a few questions ago. But given this is the last time we’re -- you’re going to, I guess, talk to or disclose the Heritage business, you’re guiding to kind of like a mid-single-digit growth for next year.

When you guys step back and you just really look at that business, like how should investors view the growth profile of what is core Heritage Aspen over the next three years? Like does this remain a mid-single-digit grower? Is this going to accelerate, decelerate? Like how do you guys think about the growth profile of this business over the next few years?.

Well, let me -- look -- first of all, we’re guiding to 7.5%. And I guess that would be at the high end of mid-single-digits. But look, we -- for us to get to our growth rate that we believe this business can operate at, the HAT business will be a double-digit growth business. That’s our expectation.

We are revisiting our expectations around the engineering business from being sort of a high mid-single-digit business to high single to double digits. I think our MSC business hit a soft spot, if you will, this year. That will recover. And we continue to have expectations about the NIM suite.

This is why we made that tuck-in acquisition that we just announced. So overall, our expectation is for HAT to be a double-digit grower. Now, what I would tell you is this is on an ACV basis in the past has been an annual spend.

So, there’s a little bit of a step-down because of the higher base in ACV, but overall, our expectations haven’t changed for that suite, okay?.

Makes sense. And then maybe just a quick follow-up for me is, I think you guys, during the Q&A, said that you look at to the current guidance is sort of a floor.

If we were to look at the heritage business or some of these newer assets from Emerson, like 12 months from now, you guys beat the guide, where would we expect -- where are you most confident to see the upside come from? Is it from the Heritage business or some of these newer assets?.

I mean, look, I think chemicals plays a big role in the outcome for HAT. Listen to the commentary from chemicals company CEOs, they expect chemicals to be subdued through the end of this calendar year. They are not saying anything about next year, but we assume it’s more of the same, to be conservative on our guide.

If this change, I could provide some upside. I’m a big believer in our MSC business. We were fully focused on executing on that business. Our engineering business shown strong resilience. But look, I think DGM, we’re gaining momentum on that business as well.

I look at sustainability, could be the big surprise as well here and the big benefit on sustainability is coming through the HAT suite. Electrification is what drives DGM and we’re building the pipeline there.

So, I know I’m sort of giving you an answer for everything, but I just think that there’s just a lot of opportunity out there, and it will be just a matter of execution. So, we’ll see what outperforms, but 11.5% is a floor..

[Operator Instructions] And our next question comes from Mark Schappel from Loop Capital Markets..

Antonio, this quarter’s remarks around the DGM business were much more positive than last quarter when you ran into some project milestone issues and had some longer sales cycles that you spoke of.

I was wondering if you could just review once again some of the changes in that business over the last quarter that you’re seeing?.

Look, I think we need to talk about the cadence of the full fiscal year. There was an incredible amount of work going on in Q1 and Q2 to lay the foundation, put in place the teams, the processes, the systems, are pushed into the market of SSE and DGM with term software -- or term licensing for the software.

As we got into the services business, there are some things that we found there. And in a way, a lot of things came to ahead in Q3. We learned a lot out of the Q3 quarter. And I would also argue that those learnings were quickly applied early in Q4 and it was produced, what I think was much cleaner execution in Q4.

There was very little learning that happened in Q4. It was more about applying what we learned from the previous three quarters. And then, I think that we are -- we generated a momentum, which is what’s propelling us into fiscal 2024.

So, I think it’s just how the year flowed and the activities that were happening and the assumptions we made sort of all came together in the Q3 quarter, but we quickly pivoted.

And I’m very proud about the job that the team did coming out of that quarter to really refocus our execution, and therefore, you have what I think is a tremendous Q4 outcome..

And then, as a follow-up, with respect to Micromine and the termination of that deal, to be relevant in the metals and mining industry, do you believe that you need to do another transaction in that sector?.

Well, look, I’ve always said that if we want to sort of grow and be relevant in a new industry, we need to have an anchor asset, meaning buy something that gives us already critical mass. And therefore, the answer is yes. I still believe that in any industry that we decide to go into, the goal has to be to buy an anchor tenant, if you will..

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

Yes. Look, I want to thank everyone for joining us on the call today. Again, just to reiterate the takeaways. Look, we built the foundation for the next stage of growth for the company. And I hope that’s clear. We’re entering fiscal ‘24 with momentum, and we believe that the guidance that we provided supports that.

We continue to see strong demand around our mission-critical solutions, HAT, DGM and SSE. And we see emerging opportunities in sustainability, especially for our engineering business. So, all of this, we believe, is creating a very exciting outlook and environment for the new AspenTech. And well, our job is now to execute in fiscal ‘24.

Thank you, everyone..

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