Antonio Pietri: Yes, sure. I mean, look, let me first say that a lot of work and a lot of goodness happened in fiscal 2023. We — what I would say is, we synchronized the two organizations on what was possible, considering the trajectories of the two companies in their own markets. We now in fiscal 2024 expect to start seeing some of that benefit, and the reference that you mentioned is an example. What excites me and excites all of us is the huge installed base of systems that Emerson has in the market, not only in our core market, but in other markets, as you saw. That was a pulp and paper reference, which is typically not a market that AspenTech pursuits. So a huge installed base of DeltaV systems, huge installed base of Asian systems in power.
Huge installed base of maintenance systems, Emerson maintenance technology capabilities that we believe are also opportunities for our asset performance management solution and especially the Mtell solution. The AspenTech organization now has access to all that installed base. It’s engaged with the Emerson sales organization and the different account teams. And from a standpoint of estimating the opportunity, you need to look at the Emerson installed base and then you would have to determine what is the possibility there for AspenTech. But we also know that customers are very excited about what’s possible between AspenTech and Emerson. And this is something that we’ll be talking about during our global conference coming up at the end of April next year.
So more to come, but it’s about their installed base and then how AspenTech can be accelerated into that installed base.
David Ridley-Lane: Thank you. And then were there any sort of meaningful levels of digital grid management perpetual license bookings this quarter? And just an update on the pipeline, how the customer receptivity is for term license proposals that you’re putting across the table?
Antonio Pietri: Yes. Look, the fact is that we — we exceeded our expectations for the quarter around perpetual licenses for DGM. That continues to be a play for us. This is a transition that will happen over many years. Some customers are more willing to go to term than others. But what I want to emphasize is that certainly, a perpetual license contributes to revenue, contributes to upfront free cash flow, but it also generates GACV from the maintenance support that is in those agreements. And that’s normally somewhere around 19% of the licenses, the perpetual licenses. So while, of course, eventually, we will prefer to have all that business be term, there is an important benefit from perpetual licenses that is reflected in the growth expectations for DGM in the year.
But look, our pipeline is supporting both perpetual licenses and term. What I’ll say about term, it’s a new licensing model for customers. There’s – like it happened with HAT, it was the beginning in 2009, 14 years ago. Customers have to get familiar with the model, have to get familiar with the terms and conditions. And therefore, that aspect of the negotiations takes a little longer. We saw good business in the quarter, and we have good engagement around term deals as well. So look, this is a transition that will happen over many years, but good benefits overall.
David Ridley-Lane: Thank you. And if I could squeeze one more in. So if I understood your sustainability comments around the high velocity sales force, you’re starting to sign up engineering and construction firms for incremental tokens around these projects today, and you expect that to build as you go through the year?
Antonio Pietri: Yes. We find EPCs to be very bullish about the — how sustainability CapEx is flowing to them. And therefore, it’s driving more use of tokens. One of the customer references that we talked about, while that customer is not an EPC, they’ve made a very strategic decision to focus on growing green hydrogen. And they doubled their entitlement with AspenTech. This is a seven-figure doubling of entitlement. So that benefit is absolutely now flowing through our growth, and we expect it to continue to be more and more so going forward.
David Ridley-Lane: Thank you very much.
Operator: [Operator Instructions] The next question comes from Jason Celino with KeyBanc. Your line is open.
Antonio Pietri: Hi, Jason.
Devin Au: Hey Antonio, hey Chantelle, it’s actually Devin on for Jason tonight. Thanks for taking our questions. Just want to start off, I just want to get a little more detail on the ACV growth and in the quarter. I mean it decelerated a little bit on a year-over-year basis. And when I look at kind of the balance of the year, I think you mentioned expecting SSE to have a pretty big second half. But any other commentary you can share on just what’s giving you the confidence that ACV growth is really going to accelerate in the back half year?
Antonio Pietri: Okay. Go ahead, Chantelle and I’ll help you.
Chantelle Breithaupt: Yes. I think to the point I’ve add any additional color, when you take the current — the Q1 period year-over-year, if you look at — if you remove the onetime benefits of the SSE commercial transformation and Inmation, we actually had a 1% growth in Q1 last year versus the 1.4%. So if you look at organic growth, it’s actually expansion of 1% to 1.4%, which I think is really critical from a run the business operational perspective and we’re pleased with that underlying growth. If you look at the remainder of the year, there are several things we’re confident in, and I’m sure Antonio will add some color. But everything from the SSE terminals in Q3, the sales productivity ramping that we talked about, the investment in Q4 last year, Q1 this year.
The benefit of the DGM pipeline growing in the sense of both the pipeline term and aftermarket sales and then traditionally HAT has had stronger linearity in the second half. So we see quite a few factors. And Antonio, if you want to add any color to those five things?
Antonio Pietri: Yes. I mean, Chantelle is right. Look — we’re excited. I’m very excited about what’s happening here. Of course, there’s a lot of foundation building and now expansion because, in a way, AspenTech accelerated from $700 million to $1.1 billion in revenue and the related ACV overnight. So now it’s expansion. If you look at Q1, as Chantelle said, look, in Q1 2023, there were benefits from transformation of SSE, significant benefits and then the Inmation inorganic benefit. On an apples-to-apples basis, it’s a 40% improvement in the performance in the Q1 quarter versus last year. But look, what excites me is, okay, we’re starting to see the flow of sustainability benefit through our high velocity sales organization.
But if you go to Europe, for example, our installed base of customers there are incredibly focused on sustainability. Today, we announced that press release related to our partnership with OMV in Austria and where they’re doing around biofuels and synthetic fuels, but – but you also have many other customers working on this type of use cases. So they will believe also – there will be an important benefit to have, not only in engineering, but MSC as well, and I believe also in APM. SSE, significant sustainability benefits. If you look at DGM and as I travel around the world, and I have over the last 18 months, talking to DGM customers, the opportunity is incredible. Look, we manage our technology, manages the largest transportation grid in Latin America.
We — our technology is responsible for managing the entire gas distribution network of Spain. The entire India grid is managed by the Monarch technology, the entire India grid. This is the largest synchronous electrical network in the world in one country. And the opportunity in India, as I meet with customers and the successes that we’ve had over the last 12 months in Europe around transportation, but also distribution, the 40%-plus market share that we have for DGM in North America as well. And we’re only getting started outside of North America. We’re doubling our sales organization in the field outside of North America to pursue opportunities, and that will continue to happen in future years as well. And the expansion of HVS [ph] is about sustainability.
So as we look at all the macro indicators, the quality of the technology that we have and the opportunity and the CapEx that are starting to flow around global electrification and sustainability is very exciting. So the point that Chantelle made, look, this is a year is 12 months and four quarters. We just completed our first quarter, and now we’re excited about Q2, Q3 and Q4.
Devin Au: Got it. Got it. I really appreciate the clarity here. Just one quick followup. I think last quarter, you also mentioned seeing some good cross-sell interest from your chemicals and refining customers and looking into some of the microgrid management capabilities. I’m just kind of curious if those cross-sell interest crystallized in the quarter or showing up more in the pipeline in the near term here? Thanks.
