Antonio Pietri: Yes. Yes. No, look, it will — it is showing up in the pipeline and it will be down the road because the conversation started to happen really in the last six months to nine months around microgrids. I had a meeting with a customer in India last week that has been a customer of HAT for 30 years. And when they found out that our capabilities around microgrids, but more — I think more importantly, the fact that we are now — our technology is responsible for maintaining the India electrical grid imbalance. And in operations, I mean, our technology keeps the lights on in India. It was very exciting for that customer also the fact that we actually managed to transmit the distribution of electricity in some of the major cities in India.
And therefore, that gives credence gives credibility to them, the capabilities that we can bring to bear around their own microgrids and their own utilities as they start incorporating renewables, as they start generating power from renewables because this customer is making a huge investment in solar power as well, even though there historically been chemical — so petrochemical company. So this is also going to be an opportunity. But again, customers are only starting to learn about all of these, and those opportunities will be in the pipeline down the road.
Devin Au: Great. That’s great to hear. Thanks for taking my question.
Antonio Pietri: Yes, you’re welcome.
Operator: [Operator Instructions] The next question comes from Josh Tilton with Wolfe Research. Your line is open.
Antonio Pietri: Hi Josh.
Arsenije Matovic: Hi, Antonio, hi Chantelle. This is Arsenije on for Josh. Thanks for taking my question. Looking at seasonality, you reiterated with the 60% range of net new ACV in second half, that implies a significant step up in 2Q. Can you elaborate on what provides confidence in that outlook, especially as a higher concentration of attrition as expected? Because I think it would be the largest 2Q quarterly net new ACV step-up and the second largest quarterly increase ever realized. And then just a brief followup. Thanks.
Antonio Pietri: All right. Well, look, I think Chantelle reiterated some of the reasons why we think not only Q2 and by the way, yes, I know we talked about the linearity of the year and what it means for Q2, but there’s also Q3 and Q4 here. Look, I think more immediately, it is starting to see the impact from the hiring, the incremental headcount that we’ve been putting into sales since the beginning of Q4. We made also significant progress in that area in Q1. And then our pipeline of business, this is something that is — our pipeline is continuing to grow across all three sort of historical businesses, HAT, OSI and SSE. And then okay, Q3, we’ve talked about the SEC renewals and in general. But look, historically, Q2 is the end of a fiscal year for most of our customers in HAT, also customers in SSE, DGM.
Frankly, we haven’t seen any seasonality to DGM because of the way those opportunities flow, mostly RFPs in the initial projects and then aftermarket sales and by the way, something that I want to say about the DGM business. The sales cycle for new customers in DGM is very long. We talked about it, 12, 24 months. But there’s a business, once you’re installed, that is much more accelerated. The name of that sales team inside AspenTech is aftermarket. I’m sure we’ll change that name at some point. But that business is a shorter sales cycle business, is add-on once you’re installed is adding new applications or new capabilities to what’s already installed. And that’s an area we’re significantly increasing headcount. Sales cycle there, it can even be three months, but more normally six to 12 months.
So this is an area where we see the opportunity to accelerate growth because of the cyclicality and then the focus on the incremental headcount that we’re seeing there. And we expect to see some of that benefit in Q2 as well. But I don’t – linearity is important, of course, because you have to be building the business in the year to eventually deliver a final outcome. But we still have three quarters. And Q2 is an important one, but Q3 and Q4 are also very important.
Arsenije Matovic: Got it. Thanks for that. And on DGM, you mentioned strength in perpetual license. Also, I think last year, because it was still bundled, you mentioned there would have been $16.9 million in DGM ACV in fiscal 2023 Q1. When I’m thinking about kind of the strength in the perpetual license this quarter, could you provide color into how strong DGM ACV was this quarter, assuming that there was probably some perpetual SMS tailwind, given that strength of perpetual license? Thank you.
Antonio Pietri: Yes. Look, I mean, normally, we don’t like to disclose outcomes in quarters because quarter performance can be given by many reasons. We had a solid quarter in some areas of DGM, and we’re tracking in other areas. We still believe that we’ll meet or exceed our number for the fiscal year for DGM, and that’s what we’re focused on. But the business continues to be very successful. And as I said, from my interactions with customers, I think this is a business that as we expand globally through headcount and engagement with customers, engagement with our own historical customers in HAT, this is going to be very exciting and interesting.
Arsenije Matovic: Thank you, Antonio.
Antonio Pietri: Yep, you’re welcome.
Operator: [Operator Instructions] The next question comes from Mark Schappel with Loop Capital Markets. Your line is open.
Antonio Pietri: Hi, Mark.
Mark Schappel: Hi Antonio, hi Chantelle. Antonio, I want to turn to your chemical business. I wonder if you could just talk or speak to the parts of the overall chemical market that you’re seeing and the most pressure, like say, bulk chemicals, ag chemicals, specialty chemicals. And then also maybe if you could also address what you’re hearing from your chemical customers with respect to the potential likelihood of their businesses snapping back next year?
Antonio Pietri: Yes. Look, I do think if you listen to the earnings calls from chemical customers over the last couple of weeks, two, three weeks, there’s a little bit of a more positive narrative from these customers. If I think back over the last 12 months, there’s no doubt that Aspen Chem [ph] remain sort of a positive area for chemical customers, bulk chemicals, less so. And that’s where I think a lot of the herd was, depending on the region. It was destocking or demand. In Europe, it had to do with cost and the implications of the Russia-Ukraine war and so on. Now what we’re starting to see and hear from customers is improving demand, sort of the – the green shoots of improving demand around bulk chemicals. I think spec chem has continued to remain solid.
And they’ve also differentiated between their commitment and ability to again sustain their CapEx investments even through this down cycle because that’s a longer-term investment versus OpEx. And that’s what we benefit from. So I know that’s been a question for investors between Emerson and AspenTech. I believe Emerson benefits tremendously from CapEx. We benefit from OpEx. Now we’re here in budgeting season and I’m not so sure that the outlook for these chemical companies will change dramatically. Therefore, their budgets might be equally subdued for next calendar year, their next fiscal year. But we’ll see. But clearly, there’s — you’re starting to hear a little bit of more positive remarks around their macro demand environment than we’ve heard over the last six, nine months.
Mark Schappel: That’s helpful. Thank you. And then Chantelle, real quick. Last quarter, I think it was noted that there were a few customers, particularly in Latin America and Asia that were just taking a little bit longer to pay. And I was just wondering if it’s fair to assume, based on the good cash flow print this quarter, whether that trend has kind of corrected itself this quarter?
