Good day and thank you for joining the conference call on the financial results of Aspen Technology for the second fiscal quarter of 2024, ending on December 31, 2023. With me today are Antonio Pietri, President and CEO of AspenTech, and Chris Stagno, Interim CFO of AspenTech. Please note that the investor presentation has been posted on our website, and we encourage investors to refer to it during today’s call.
I would like to begin by reminding you that our statements will contain forward-looking information. Actual results may differ from those anticipated in these statements. Factors that could cause differences in results are discussed in today’s press release and our annual report on Form 10-K, as well as subsequent filings with the SEC. Any forward-looking statements we make will be based on current assumptions, and we do not commit to updating these statements based on new information or future events.
During this presentation, we will present both GAAP financial results and certain non-GAAP financial metrics. The reconciliation between these metrics is provided in today’s press release on financial results and the investor presentation, which are available on our investor relations website.
But now, let’s hear from Antonio. Antonio?
Antonio J. Pietri: Thank you, Brian, and a warm welcome to everyone joining us today. I want to start by saying that I have never been more excited about AspenTech’s future than I am right now. Our team at AspenTech has performed exceptionally well in the dynamic macroeconomic environment, delivering solid results in the second quarter. We are receiving a clear signal that our portfolio and team are uniquely positioned to leverage and benefit from the numerous opportunities brought about by the energy transformation in terms of efficiency and sustainable development.
In the second quarter, we saw strong demand for our products and solutions. The Annual Contract Value (ACV) was $914 million, representing a 9.6% growth compared to the previous year. Free cash flow was $29 million. It is worth noting that these results reflect a delay in renewing a contract with a large customer, which was expected to be renewed in the second quarter and reduced the ACV growth by approximately 0.6 percentage points. We plan to close this contract in the third quarter, which will contribute to ACV growth in the third quarter.
Additionally, I would like to highlight four key takeaways from our second-quarter results. First, our total software license potential customer base continues to grow. We are seeing growth in both the number and size of business opportunities across all our domains, in line with our investments in sales channels over the past few quarters and the transformation of our DGM and SSE operations. In the second half of fiscal year 2024, we intend to convert the majority of this potential customer base into sales.
Second, the macroeconomic environment and demand for our products and solutions remain strong across most end markets, consistent with our comments over the past few quarters. Third, in the second quarter, we made significant progress in modernizing our product portfolio and implementing new sustainability-related use cases. The successful upgrade to V14 software introduced enhancements that will contribute to growth in the second half of fiscal year 2024 and beyond.
Fourth and finally, considering all these factors, we are confident in our ability to achieve ACV growth of at least 11.5% for the full fiscal year. We recognize the need for strong performance in the second half to achieve this goal and continue to believe that we are well-positioned to do so. Moving to slide 4, I would now like to provide an update on our markets and domains, starting with our Digital Grid Management (DGM) solutions for the energy industry.
DGM had an excellent first half, leveraging both the critical role of its products and solutions and favorable market conditions. Today, energy companies are in the early stages of an unprecedented investment cycle aimed at expanding the power grid, adopting renewable energy, and enhancing cybersecurity capabilities to meet the growing energy demand resulting from the global energy transformation and the security needs of nations worldwide.
DGM’s transformative initiative, modeled after AspenTech’s historical approach, has yielded expected results over the past 18 months. These actions have included introducing and expanding the term-based software licensing model, expanding our sales footprint and global presence to capitalize on growing market opportunities, and developing the Independent Software Provider (ISP) network.
For example, in the second quarter, we secured several significant software deals, including one with a leading US energy provider as part of their parent company’s supply standardization program. Our energy management solutions, proven value, and longstanding relationships with other energy providers within the same corporate group were key factors in securing this contract. In both the US and abroad, the strength of our DGM products, hardware independence, and ability to adapt to various energy industry situations work in our favor.
Our industry is booming, and we see tremendous opportunities in the energy transformation market. Programs for modernizing and expanding energy infrastructure worldwide present countless opportunities for our solutions. We are ready to seize these opportunities and continue delivering innovative solutions for our customers.
Thank you for your attention, and now I will hand over to Chris, who will provide more details on our financial results. Chris?
Chris Stagno: Thank you, Antonio. I would now like to discuss our financial results for the second quarter of fiscal year 2024. The Annual Contract Value (ACV) was $914 million, representing a 9.6% increase compared to the previous year. This result reflects strong demand for our products and solutions across most end markets.
Free cash flow was $29 million, demonstrating our ability to generate cash and manage capital efficiently. We anticipate closing a contract with a large customer in the third quarter, which will contribute to ACV growth.
Meanwhile, we continue to develop our potential customer base. We are seeing growth in both the number and size of business opportunities across all domains. We are confident that in the second half of fiscal year 2024, we will convert the majority of this potential customer base into sales.
In summary, our second-quarter results are promising. We are confident that we can achieve our target ACV growth of at least 11.5% for the full fiscal year. We look forward to the future and continuing our mission of delivering innovative solutions for our customers.
Thank you for participating in today’s conference call. We welcome any questions from the audience.
The source of the article is from the blog motopaddock.nl