Operator: Our next question comes from Dylan Becker with William Blair.
Dylan Becker : Maybe kind of double clicking on the pipeline strength and being more calendar year versus fiscal year. Any kind of incremental takeaways from the conference last week and your customer conversations that help kind of validate that conference. I think it was the first time you guys were able to kind of show the full strength of the combined Aspen and Emerson approach. So maybe some customer takeaways that help kind of support that intent to spend initiative.
Antonio Pietri : Yes. Well, let me look. First of all, the incredible feedback from customers about the conference. The value proposition, our strategy, the opportunity that they see and the challenges that they have and how AspenTech is incredibly well lined up across all of that. So, it was really a moment of a high and that was great to see. Look, we also had great customer meetings around just new relationships, developed extending existing relationships and also specific deals. If you look at what happened, we had close to 1,200, 1,300 customers, our DGM plenary, which happened on Monday, was a standing room only plenary. We had seats for 550 people. We believe we got in there about 650. Part of that was due to customers from other industries interested on the DGM solutions to understand their applicability into their industries, whether it’s refining, chemicals, mining.
It was a sight to see to have that standing room on the plenary. We got great feedback from customers in DGM about the opportunity to take some of our artificial intelligence capabilities, our optimization capabilities, our control capabilities from our Heritage AspenTech Industries, refining chemicals into our utility solutions to enhance the value creation for them and resiliency of the grid. If you look at also the sessions that we had, one of the main points of feedback that we received is that some of our customers were frustrated, because there were so many sessions that they wanted to attend that were happening at the same time. So they were asking us to see find a way to extend the conference next time, so that they can attend more sessions.
And this just speaks to the wealth of technology that now exists inside AspenTech that are so relevant to the challenges and opportunities that these customers are facing. So look, I said it in my plenary presentation, I’ve never been as excited about the future of this company as I am today. I came out of the conference even more convinced about that feeling and statement. And I think we have to work our way through this moment that we encounter in Q3. We have to certainly finish up some of the transformation initiatives that we’re working on. And now that we have in place a sales team, because we now have it in place, We’re only expanding sales in DGM to move into Asia and the Middle East. We’re going to focus on solidifying the execution of the sales team, making sure that it’s performing at the excellent level that we have traditionally performed in AspenTech, and I can only see positive going forward.
But certainly, this has been a more challenging year than I expected than we expected in the company. But I just see these as a bump on the road and absolutely doesn’t change our future trajectory whatsoever.
Dylan Becker : Maybe sticking internally as you guys kind of think about the expense management side of the equation as well too. I know you called out the opportunity to rationalize and realize productivity gains. You’re now 2 years into that Emerson integration. I guess I wonder where or how you’re seeing kind of the most readily apparent opportunities there that haven’t been realized already and maybe what’s more kind of the long-term structural shift? I know sales will be a component of that and sales efficiency, but thinking about kind of the broader cost structure as well.
Antonio Pietri : Well, I mean, look, certainly, and we said it in the prepared remarks, I think one of the big opportunities that will now and we’re already working on and we’ll continue to work on here is efficiencies and productivity. When you have three companies coming together and really three and a small one in nation, there will always be opportunities to drive efficiencies as you simplify it, as you streamline the organization. So we’re very much focused on that and including onetime expenses sort of non-compensation expenses, because as always, if you want to be a best-in-class profitability company, you have to do more with less and as a culture that we’re building here and as part of the focus on efficiencies that we’re driving and we’ll continue to drive.
From a productivity standpoint, it’s always been my north star. You get to that profitability level is that really doing more with less on headcount and driving to maximum productivity. It’s a multiyear journey, because you cannot just, it’s not a binary 0 to 1. As you drive improvements and exercise your muscles, you get feeder and feeder. So this is why I said it was a multiyear journey to the productivity that we want to get to, but as you drive that productivity, you can grow and spending less, which then starts expanding profitability and free cash flow going forward. I know one of the things that we are giving credit for was in the early phases of my tenure in AspenTech when we maintained flat expenses for 4 years in this company and we drove incredible increases in profitability.
And I believe that’s possible. So I hear as well in the new aspect. So we’re going to be focusing on all that much more rigorously. And in the meantime, we’ll build our, we’ll optimize our sales muscle and I’m sure we’ll find ourselves in the right place here pretty soon.
Operator: Our next question comes from Clark Jefferies with Piper Sandler.
Clark Jefferies: Antonio, I think you’ve really shaped a lot of the description around budget versus spending intent. But I really wanted to, I think, put in that final piece of the discussion around, are these deals primarily lost to no decision or later decision more than anything else? And I think the final part of that is, I didn’t see it in the presentation, but want to be explicit. Is attrition trending as you expected? Is the rough 5% number still the applicable number when you think about this commentary around expansion versus retention of ACV? And I have one follow-up.
Antonio Pietri : No, great point. No, look, our attrition is in line with what we guided for the year, about 5 points of attrition. Of course, we’ve had this large deal that we renewed in Q2, it’s now in Q3 that produced a big bump of attrition. Excluding that deal, our attrition is in line because we’ve now closed that deal, so that was a net neutral deal, if you will. But no, attrition is fine and we believe we have very good side into that attrition in Q4 as well. Look, it’s an interesting dynamic, because while a lot of engineering business got pushed out of the quarter, our E&C customers are expanding spending with AspenTech. We signed a number of transactions in the quarter, especially one of our largest E&Cs, where they expanded their spend with AspenTech by an incremental percentage, which is a sizable number in the context of their deal of the spend they already have with AspenTech.
We’re seeing these the same behavior across more and more E&Cs. So I don’t think it’s a CapEx related issue, because CapEx is a long term investment by these customers. I think this is a temporary pullback on OpEx spending that impacts on short-term deals in engineering and MSC and APM. The dynamic that we saw in APM is very typical of the dynamic that we saw during the pandemic in that pullback on OpEx, maintenance being a very discretionary area of spending. And even if you have deals that have already been signed, if they come up for renewal, we’ve also seen those customers give up on those on those agreements in order to save that spend. So overall, it’s a combination of behavior that support the macro, the positive flashing green indicators that we have, but also what was clearly a pullback on spending in the quarter.
Clark Jefferies: And I think just the last point on this about really being March being the timeframe where you started to see some of these impacts to sort of closing times. Just as you sort of frame up across all the segments April and where we are into May, have you seen any definable improvement, especially maybe in the wake of optimize? And if there is any amount of reminder you can give us around how much of the business in ACV terms closes in the last month? That’d be incredibly helpful.
Antonio Pietri : Well, I mean, we’re a typical software company in that regard in that most of our business closes in the last month, okay. And you can ask any software company and they’ll probably give you numbers somewhere around 50%, 75% of the business closing in the last month of the quarter. That’s just how sales cycles work. And now I’ll say, and this is just a commentary, we’ve already closed good business in the April month, a lot of it tied to the Q4, to the Q2 to Q3 deals that we were pursuing. But there’s also some business in Q3 that has moved into Q1. But what I’ll also say is that, hardly ever those deals disappear from our pipeline, like a customer didn’t want to do business and the deal falls off of the pipeline. It gets pushed out into the future and most of the business that pushed out of Q3 is in Q4 or some of it in Q1.
Operator: Our next question comes from Mark Schappel with Loop Capital Markets.
Mark Schappel: In your prepared remarks, you noted that you were reviewing your APM segment as a result of the segment’s underperformance in the quarter. And you may have touched on this a little bit in the prior question, but I was wondering if you could just provide some additional details around your APM segment and what you’re doing there.
