Mark Schappel: Okay. That’s fair. Thanks. And then regarding your joint commercial agreement with Emerson, is there an immediate or maybe a near-term industry focus around that agreement? So for example, you did a pulp and paper joint deal with them last quarter. It looks like a pharma – a nice pharma deal this quarter. It appears that the commercial agreement is focused more on process manufacturing industries outside of the core oil and gas business. So I was wondering if you could just comment on that.
Antonio Pietri: Yes. Look, I think in the first 12 months of the commercial agreement, mostly fiscal 2023, as we learned about each other, it became clear that focus was going to be very important in succeeding initially in the partnership. So we have – we are targeting very specific areas of engagement, both areas like pharma, but also areas where Emerson has a lot of strength in their businesses, whether it’s geographies, whether it’s types of projects that they pursue and other areas where Emerson has a very strong presence and also non-traditional industries for AspenTech. We’ve been very focused on that in this fiscal year. Our efforts are very targeted in that regard. And we believe that this is paying off and will pay off more handsomely in the future as we ramp up those go-to-market activities.
Mark Schappel: Great. Thank you. That’s all for me.
Antonio Pietri: Yes. Thank you, Mark.
Operator: And thank you. And one moment for our next question. And our next question comes from Jason Celino from KeyBanc Capital Markets. Your line is now open.
Antonio Pietri: Hi, Jason.
Jason Celino: Hi, thanks. Yes. Hi, Antonio. Now that we’ve – well, not we’ve, but now that most of your customers have kind of set their budgets for the year. How are global CapEx rates looking for this year? And maybe how does that maybe compare to last year?
Antonio Pietri: Yes. No. Look, actually, we’re very excited about what we’re hearing and seeing. Oil and gas CapEx are more or less in line to last year or up depending on the customer segment or geography. And by that, I mean, probably 5% to 10%, but mostly in line with last year, which was healthy and good for our business. Refining customers equally, CapEx spending in line with what they’ve traditionally done and what they did last year. Chemicals is more of the same. So we don’t expect a recovery in the spend – OpEx spend by chemical customers. In calendar 2024 the fact is that the sort of soft patch that they are going through will probably extend through the full calendar year. And then utilities, look, utilities more and more CapEx is being targeted at global electrification and in that utilities.
But part of that CapEx in global electrification is going into renewables, whether it’s solar and wind. But that renewable – that electricity produced from renewables has to be put into or connected into the grid. And therefore, utilities then have to spend to upgrade their systems, deal with the complexity of more and more renewable energy electricity into their networks. And this is one of the main drivers for them to have to spend to upgrade their systems. We’re very excited about what we were hearing from utilities. And look, it used to be a very sort of a steady-state industry 30, 40 years ago. Today it is an incredibly exciting industry. It’s an industry that absolutely will have to rely on technology to deal with the complexity of the grid to maintain the grid imbalance and in operation but also to cybersecurity.
And our conversations not only about delivering our software to these customers, but also co-innovating and accelerating co-innovation because part of – one of the challenges that if you talk to utilities customers is they feel that there needs to be an acceleration of innovation for them to keep up with the complexity that they’re having to manage. So we’re very excited about this over the last 12, 18 months and especially the last six months of last calendar year, I traveled to main utility customers around the world. Not only am I excited about what I just mentioned, but also about the role that now new AspenTech with the DGM suite plays around global electrification and global infrastructure. AspenTech and the Monarch SCADA system in the DGM suite is responsible not only for managing, but keeping the electrical grid in balance for the entire country of India, for example, but also the entire country of Vietnam, but also for Southern California, the lights in Southern California are kept on through the use of our outsource technology and systems.
40% of utilities in the United States are using now the DGM products and solutions that AspenTech is key to them. But also we’ve made great progress moving into Europe. And now we’re going to be basically the foundation technology for multiple countries in Europe and certainly in the Netherlands, TenneT is a well-known installation that’s been going on for two, three years now. But we’ve also won business in two or three other countries where our technology is going to be the base technology to run the grid in those countries. And I won’t mention them because just recently signed agreements but equally, our expansion into Latin America, we run the largest transmission network in Latin America using our technology, the entire gas distribution network in Spain is run using the Monarch SCADA system in the DGM suite.
And look, every time we win a deal we’re displacing the competition. we’re displacing industrial that have been in the market for many years, but now their solutions having kept up with the needs of the industry. And this is then where OSI and now AspenTech are stepping into the bridge and being very successful. So we’re very excited about what we’re seeing with DGM. I think this is a game-changing suite for us. And as I said, it’s not only the volume but also the size of deals. And I think that’s part of what gives us confidence about the success we’re going to have in Q3 and Q4.
Jason Celino: Okay, awesome. Good stuff on DGM. Maybe to follow-up on Matt’s earlier question, so apologies, but if we strip out that chemicals deal slipping and you think about the pipeline moving a little bit more back half weighted what area moved back if it was a specific vertical, or was it chemicals? Curious on how you would kind of characterize it.
Antonio Pietri: Well, look, I don’t want to confirm or deny that deal that slipped, is a chemical deal. We haven’t said anything about what vertical it is in. But putting that aside, look, as we said, certainly, the MSC suite, what we’ll say is that deal certainly is a transaction that is all MSC software. So, that impacted the performance of the MSC suite in the first half of the year. Chemicals was a little flat. So, we do expect a stronger performance for MSC in the second half of the year. APM has continued to behave in the same manner that it has now for a couple of years. But we’re also excited about our performance in engineering because we do think that we’ll be able to make up if necessary, for any shortfall that we may see around MSC or APM.
But our goal is to get certainly the MSC suite to plan and, if possible, also APM. And look, what we’re seeing with DGM and SSE is also exciting. So overall, we were confident there’s work to do here. We’re going to execute and we have two quarters to do at least 11.5%.
Jason Celino: Okay, great. Thank you, will get back in queue.
Operator: Thank you. [Operator Instructions] And one moment for our next question. And our next question comes from Nay Soe Naing from Berenberg. Your line is now open.
Nay Soe Naing: Hi, everyone, thanks for taking my question. I actually have a few [indiscernible] if I may. Just on these developments…
Antonio Pietri: Nay Soe, you are breaking up. You are not coming through. Operator, I think we lost Nay Soe.
Operator: One moment please. One moment for our next question. And our next question comes from Arsenije Matovic from Wolfe Research. Your line is now open.
Antonio Pietri: Hi, Arsenije.
Arsenije Matovic: Hi, this is Arsenije – hi Antonio how are you? This is Arsenije on for Josh. Thanks for taking my question. So seeing that this delayed renewal impacted about $5.4 million of ACV in the quarter, what gives you more confidence in the visibility to ramp in the second half? Was this idiosyncratic to the company up for renewal? Or could this maybe show more weakness in their respective end market then was initially expected for the second half of 2024. And then I have a brief follow-up on DGM. Thanks.
Antonio Pietri: No, look Arsenije, the specifics around these deals that didn’t renew have nothing to do with the macro environment or demand. It’s just some internal issues and administrative issues with this customer. We thought the deal was going to get renewed and it didn’t. So it will happen now in Q3. So nothing to do with demand at all. Look, what gives us confidence, we’ve said it. A pipeline, the strength that we’re seeing in DGM, SSE Engineering, a bigger sales organization that is now in place to convert that pipeline. So overall, those are the factors that we think will get us there.
