00:04 Good day and thank you for standing by. Welcome to the Aspen Technology’s Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. [Operator Instructions] I will now like to hand the conference over to Brian Denyeau from ICR. Please go ahead.

00:41 Thank you. Good afternoon everyone and thank you for joining us to discuss our financial results for the second quarter of fiscal 2022 ending December 31, 2021. With me on the call today are Antonio Pietri, Aspen Tech's President and CEO; and Chantelle Breithaupt, CFO of Aspen Tech. 00:59 Before we begin, I will make the Safe Harbor statement that during the course of this call, we may make projections or other forward-looking statements about the financial performance of the company that involve risks and uncertainties. The company's actual results may differ materially from such projections or statements. Factors that might cause such differences include, but are not limited to those discussed in today's call and contained in our most recently filed Form 10-Q. 01:24 Also, please note that the following information relates to our current business conditions and our outlook as of today, January 26, 2022. Consistent with our prior practice, we expressly disclaim any obligation to update this information. The structure of today's call will be as follows; Antonio will discuss business highlights from the second quarter and our pending agreement with Emerson, and then Chantelle will review our financial results and discuss our guidance for fiscal year 2022. 01:51 With that, let me turn the call over to Antonio. Antonio?

01:56 Thanks, Brian. And thanks to all of you for joining us today. We delivered strong second quarter results that reflect continued improvement in the spending environment and good execution by our team. Our second quarter performance reinforces our belief in the strategic importance to customers of enhancing the operational efficiency and sustainability of their assets. 02:24 We’re now seeing this customer trend materialize in better growth as market conditions have normalized. While not all the way to back to pre-COVID levels, market conditions are moving concretely in the right direction for Aspen Tech. We’re confident this will continue to support improved annual spend growth across our business over time. 02:49 We’ve also made significant progress towards completing the proposed transaction with Emerson, which remains on track to close during our fourth fiscal quarter. As we’ve gotten to know the Emerson businesses better, we’re continually impressed by the team and their culture. 03:09 Since the announcement, we've also received more and more positive feedback from customers in a number of industries about their enthusiasm for the transaction. Given all of this, we're even more excited about the transformational opportunity the new Aspen Tech has in current and new verticals, as well as in sustainability, allowing for increased value creation opportunities for both our customers and shareholders. 03:38 Looking quickly at our financial results in the second quarter, revenue was $171.4 million, GAAP EPS was $0.92, and non-GAAP EPS was $1.20. Annual spend was $640 million, up 1.7% in the quarter and 6% year-over-year. And free cash flow was $51.9 million. 04:09 Looking at the second quarter in more detail, one of the key areas of improvement was the normalization of transaction closing cycles, which are now back to pre-pandemic cycle times. I'm pleased at how our sales organization has navigated these changes in recent quarters. 04:27 In terms of vertical performance, expanding by our refining customers saw notable improvement for the second consecutive quarter. As we have discussed in the past, refining has been a consistent source of a strength for Aspen Tech as our solutions are critical to delivering on the short-term and long-term operational and sustainability priorities of our customers. 04:52 During the second half of calendar 2021, refining margins improved meaningfully and trended back to their historical range ending up on a strong note in December. We're also encouraged by the fact that the Omicron variant has not reduced fuel demand for transportation, despite causing record numbers of COVID cases, with low inventories for diesel and jet fuel now being reported. 05:21 The performance of our refining customers in the first half of the fiscal year gives us confidence that this vertical will support the MSC business returning to consistent double-digit annual spend growth, assuming a stronger budget and spending in calendar 2022. 05:40 Chemicals, once again had a solid quarter and has been the most consistent vertical over the past two years. Within chemicals, there continue to be some areas that face supply chain constraints, but overall, we've had consistently good conversations with customers under future investment priorities. 06:00 We believe there are exciting opportunities for growth in this market and that Aspen Tech will continue to be an important partner to our customers as they drive operational excellence and transition to a more sustainable future, which for them means lower emissions, as well as circularity. 06:21 The positive results from our refining and chemicals customers drove better than expected performance for our engineering and MSC suites, which are ahead of plan for the first half of the fiscal year. 06:34 The EMC industry performed better than expected delivering a slightly positive growth quarter. The market dynamics affecting this industry have largely stabilized and backlog trends have shown modest positive improvements in the first half of the year. 06:50 Importantly, attrition amongst these customers has been tracking marginally better than expectations and we're optimistic about our ability to forecast this metric. This is a critical first step towards improved demand and a return to a stronger positive annual spend growth. 07:08 While we do not expect the E&C sector to be a primary growth driver for our business short-term, we're encouraged by deceleration in final investment decisions, FIDs, for LNG projects and in the oil and gas sector in the Middle East region, as well as expected increase in global oil and gas CapEx in calendar 2022. 07:32 In addition, the shift in their focus towards sustainability investments will help accelerate their recovery as increasingly CapEx spend will be driven by hydrogen projects carbon capture and sequestration, biofuels, wind, solar, and other projects. We believe this will drive E&C customers to be greater contributors to our long term growth target than they are today. 07:58 Finally, I would like to provide an update on our APM suite. We're beginning to see some improvement in demand conversion in this area of the business as customers increase OpEx spend on maintenance and reliability in facilities where a lot of this work was postponed throughout the pandemic. 08:17 As we have discussed during the same period of the pandemic, interest and demand for our APM solutions have been strong with consistent growth in customer engagement pipeline and pilots. Through the first half of the year, APM contributed 0.28 points of annual spend growth, just under our first half year plan. 08:41 We believe the suite is well-positioned to benefit from increased spending and contribute approximately 1 point of annual spend growth in fiscal 2022. We're also confident that our pandemic tested APM business will be better positioned for growth longer-term. 09:00 Following are references to a few of the customer transactions closed in the quarter: First, our U.S. Headquarter engineering firm, a customer for close to 15 years increased its spend with Aspen Tech now that its business outlook is improving after having reviews, its software license entitlement at renewal at the beginning of the pandemic. After conducting a thorough analysis of the market, including competitive offerings, the customer increased its commitment to the suite. 09:32 The availability in the suite of Aspen Tech’s ACCE product for Capital Cost Estimation was fundamental in the decision because the customer is in the process of reconstituting its capital cost estimation team that has been dismantled at the beginning of the pandemic and its functionality is not available in the market from other competitors. 09:55 Second, a European energy and petrochemical company and long-term user of our multivariable control technology in refining and chemicals decided to standardize all operating assets on our Aspen DMC3 multivariable control technology through an enterprise license agreement. 10:16 Two main reasons supported their decision: The operational improvement on value created by the technology; and the customers’ focus on energy efficiency and emissions reduction as part of our commitment to net zero carbon emissions by 2050. 10:34 Third, a refining customer [in Asia] [ph] conducted an extensive evaluation of asset predictive maintenance solutions, including Aspen Anto. The customer selected Aspen Anto on the basis of its technical capabilities and ease of implementation. 10:54 The acquisition of an APM solution support the planned digitalization of the customer's maintenance functional area. It is expected that Aspen Anto will be rolled out to multiple units and equipment in the refinery and in-time expanded to other refineries. 11:34 Operator, are you able to listen to us? Okay. Operator, are we back?

11:40 Yes, you are live, sir.

11:43 Okay. Thank you. We lost our network connection here in the office. So, let me get back to the – is audience able to hear me?

11:54 Yes, sir.

11:56 Okay, great. Let me get back to our customer references. Third, a refining customer [in Asia] [ph] conducted an extensive evaluation of asset predictive maintenance solutions, including Aspen Anto. The customer selected Aspen Anto on the basis of its technical capabilities and ease of implementation. The acquisition of an APM solution supports the planned digitalization of the customer's maintenance functional area. 12:25 It is expected that Aspen Anto will be rolled out to multiple units and equipment in the refinery and in time expanded to other refiners. Fourth and final, a Northern Europe independent refiner, recently formed from the acquisition of assets divested by one of the major oil companies sought to upgrade the optimization technologies in the refinery to increase profitability and reduce emissions as part of the customers and host countries commitment to net zero carbon emissions. 13:00 After a detailed analysis of the value capture opportunity, which was determined to be greater than $75 million per year and the estimation of the expected reduction in emissions, the customer committed to a site license for the Aspen DMC3 multivariable control technology and the Aspen GDOT multi-unit optimization technology in the MSC suite. This agreement was signed in a three month sales cycle. 13:31 I point out that in two of the highlighted transactions, the customers requested enterprise license agreements to deploy certain solutions across the entire asset base. We're encouraged by these examples of customers preparing comprehensive agreements to deploy solutions that are critical to their sustainability initiatives. It's important to note that these agreements are still a structure as part of our token based licensing model. 14:02 As we look to the second half of the fiscal year and calendar 2022, we're encouraged by the recent trends in key macro indicators for our business. Oil demand, while not yet at pre-pandemic levels has exceeded growth expectations. Oil prices in the range of $75 to $85 per barrel and an equally strong or stronger outlook for calendar 2022. 14:33 Refining margins back in the historical range with the industry expectations for acceleration in fuels consumption and is strengthening margins in 2022. Chemical demand and margins expected to remain strong in calendar 2022. 14:51 CapEx spending in oil and gas and chemicals is expected to increase by double-digits with CapEx spend in hydrogen carbon capture and sequestration and biofuels projects experiencing significant increases as sustainability investments accelerate. And software spend in our customer base projected to increase 10% to 15% based on customer surveys we conducted late last year. 15:20 All of these leads to our expectation of solid increases in customer budget and spending in calendar 2022, while we also remain vigilant about the evolution of the COVID pandemic and geopolitical events. Together with our year-to-date performance, we're adjusting our annual spend guidance for the fiscal year to 7% to 8% up from 5% to 7% previously. 15:48 In addition, in support of our growth guidance we’re adjusting our fiscal year guidance for attrition to 5% to 5.5%, compared to approximately 6% previously. While we're pleased with our performance in the first half of the year, and the market trends we're seeing, we’ll remind you of the potential uncertainties that still exist in the market that could change the outlook for our business. 16:18 Our other primary focus in the second half of the fiscal year is completing our transaction with Emerson. Detailed information concerning the transaction can be found in the registration statement on Form S4, recently filed with the SEC and available on the Investor Relation page of our website. Based on current information, we continue to expect we will close a transaction during our fourth fiscal quarter. 16:49 As I previewed earlier, we have been incredibly impressed with the OSI and Geological Simulation Software businesses and their employees. Like Aspen Tech, the teams at these two businesses are passionate about their customers and creating value for them. They're also passionate about the industries they serve. It is clear that both businesses have very talented workforce, lead with product innovation in modeling simulation and optimization, and have developed impressive product portfolios that are truly best-in-class. 17:28 The more we learn, the more excited we are for the long-term opportunities we will have as the new Aspen Tech and our unique position to drive profitability and sustainability for customers. We continue to be confident in the new Aspen Tech’s ability to be a consistent mid-teens grower with high recurring revenue, best-in-class margins and substantial free cash flow. 17:56 Underpinning our confidence in the growth opportunity for new Aspen Tech is the increasing importance of sustainability among operators in capital intensive industries. While sustainability has long been part of the value proposition of Aspen Tech in recent years, we have seen it become a critical lens through which many customers make purchasing decisions. 18:21 With this goal in mind, we focused our November software release on introducing over [50] [ph] new sustainability models that accelerate digitalization efforts for customers in support of their initiatives. 18:36 Our customers are taking a truly comprehensive view of how their businesses need to adapt both in the near and the long-term to meet the sustainability targets they have set for themselves. The combined product portfolio of the new Aspen Tech, which will include new electrification and carbon capture capabilities, as well as increasingly leverage AI to enhance the sustainability benefits of many existing Aspen Tech Solutions will make us a key strategic partner for all asset incentive businesses. We’re confident sustainability will support significant investment cycles in this industries over the coming decades. 19:21 Before I turn the call over to Chantelle, I would like to reiterate the key takeaways from the second quarter. Demand trends and growth continued to improve throughout the first half of fiscal 2022, which coupled with greater confidence at Calendar 2022 budgets will lead to increased spending, support our decision to raise the guidance for the full-year. 19:46 While spending is not all the way back to pre-COVID levels, we're increasingly confident that it will continue to trend positively and support our long-term growth targets. The improvement amongst owner operators, particularly refiners is an important trend that is now firmly in place. These customers have been the primary growth drivers for the business for a number of years. And we feel good that they will once again deliver consistent double-digit growth for our MSC suite. 20:20 Our strong year-to-date free cash flow performance demonstrates the scalability and efficiency of our business and our ability to generate high margins while investing in our growth initiatives. 20:35 Finally, we're on track to close with Emerson and create the new Aspen Tech in the coming months. Taken together, we have made great progress on each of our key priorities for fiscal 2022. 20:48 We believe that the combination of the transaction with Emerson and the factors discussed on this call will provide increased confidence in our ability to generate mid-teens growth and exceed $1.5 billion in annual spend in fiscal year 2026. We believe that the steps we have taken this year to create compelling opportunities to generate significant value for our customers and shareholders over the long-term. 21:18 Now, let me turn the call over to Chantelle. Chantelle?

21:24 Thank you, Antonio. I will now review our financial results for the second quarter fiscal 2022. As a reminder, these results are being reported under topic 606, which has a material impact on both the timing and method of revenue recognition for our term license contracts. 21:39 Our license revenue is heavily impacted by the timing of bookings, and more specifically renewal bookings. A decrease or increase in bookings between fiscal periods resulting from a change in the amount of term license contracts up for renewal is not an indicator of the health or growth of our business. 21:56 The timing of renewals is not linear between quarters or fiscal years, and this non-linearity will have a significant impact on the timing of our revenue. As a result, we believe our income statement will provide an inconsistent view into our financial performance, especially when comparing between fiscal periods. 22:13 In our view, annual spend will continue to be the most important metric in assessing the growth of our business; and annual free cash flow, the most important metric for assessing the overall value our business generates. 22:23 Annual spend, which represents the accumulated value of all the current invoices for our term license agreements at the end of each period with $640 million at the end of the second quarter. This represented an increase of approximately 6% on a year-over-year basis and 1.7% sequentially. 22:41 Total bookings, which are defined as total value of customer license – term license contracts where the associated term licenses were deemed delivered in the quarter under topic 606 was $182 million, a 34% decrease year-over-year. The year-over-year decline reflects a particularly strong bookings quarter in the year ago period, which included our largest ever renewal. Total revenue was 171.4 million for the second quarter. 23:08 Turning to profitability, beginning on a GAAP basis, operating expenses for the quarter were $88 million, compared to $70 million in the year ago period. The year-over-year increase in GAAP operating expenses was primarily driven by acquisition and integration planning related expenses associated with our pending transaction with Emerson. 23:29 Total expenses including cost of revenue were $102.9 million, which was up from $84.3 million of the year ago period. Operating income was $68.5 million and net income for the quarter was $61.9 million or $0.92 per share. 23:47 Turning to non-GAAP results, excluding the impact of stock based compensation expense, amortization of intangibles associated with acquisitions and integration planning related fees, we reported non-GAAP operating income for the second quarter of $92.2 million, representing a 53.8% non-GAAP operating margin, compared to a non-GAAP operating income margin of $162.2 million, and 69.4% respectively in the year ago period. 24:17 As a reminder, margins will fluctuate period-to-period, due to the timing of customer renewals and therefore licensed revenue recognized during the quarter. In particular, the second quarter of fiscal 2021 was an exceptionally strong license quarter due to the timing of some very large renewals. Non-GAAP net income was $80.6 million or $1.20 per share based on 67.2 million shares outstanding. 24:44 Turning now to the balance sheet and cash flow. We ended the quarter with approximately $211 million of cash and cash equivalents and $285 million outstanding under our credit facility. In the second quarter, we generated $41.3 million of cash from operations and $51.9 million of free cash flow after taking into consideration the net impact of capital expenditures, capitalized software, acquisition, and integration planning related payments. 25:12 From a capital allocation perspective, we repurchased approximately 439,000 shares for 65 million during the second quarter. The final settlement of shares associated with the ASR executing Q2 will occur in Q3. We do not currently anticipate repurchasing additional shares in fiscal 2022. 25:33 I would now like to close with guidance. Our updated outlook reflects the strong performance in the first half of the year, and the improving demand trends we see in many areas of our business. We believe the importance of asset optimization and sustainability are durable growth driver that give us confidence to raise our guidance for the year. 25:52 With respect to annual spend, as Antonio mentioned, we are increasing our outlook for the year to 7% to 8% growth. We’re increasing our bookings guidance range from $814 million to $840 million, which includes $486 million of contracts that are up for renewal in fiscal 2022. This includes approximately $136 million contracts, up for renewal in the third quarter. 26:18 Our expected revenue range is now $737 million to $754 million. We now expect license revenue in the range of $513 million to $530 million, and maintenance revenue and service and other revenue of approximately $196 million and $28 million, respectively. 26:37 From an expense perspective, we now expect total GAAP expenses of $413 million to $418 million. This outlook continues to incorporate our ongoing investments in our go to market organization, product development, and business units, including APM, AIoT, and pharmaceuticals. 26:56 We expect GAAP operating income in the range of $324 million to $336 million for fiscal 2022 with GAAP net income of approximately $295 million to $306 million. We expect GAAP net income per share to be in the range of $4.37 to $4.53. 27:16 From a non-GAAP perspective, we now expect non-GAAP operating income of $397 million to $409 million and now expect non-GAAP income per share in the range of $5.23 to $5.39. 27:29 From a free cash flow perspective, we are now targeting free cash flow of $280 million to $290 million. Our updated fiscal 2022 free cash flow guidance still assumes cash tax payments in the range of $60 million to $66 million. Our free cash flow outlook is equivalent to between 42% and 43% of annual spend, and highlights our predictable and sustained cash generation. 27:54 To wrap up, Aspen Tech delivered strong second quarter results. We are pleased with the improvements we've seen across the business and the strong execution from our team. Our updated outlook for the year reflects our increased confidence that we are now firmly on the path of faster growth towards our long-term targets. 28:11 We are looking forward to the completion of our transaction with Emerson and the significant opportunities that new Aspen Tech will have to create value for our shareholders. 28:20 And with that operator, we would now like to begin the Q&A.

28:24 Thank you. [Operator Instructions] First question is from Andrew Obin with Bank of America. Your line is open.

28:43 Yes, guys. Good afternoon.

28:46 Yeah, hi. Good afternoon, Andrew.

28:48 Yes. Congratulations. Seems like we're at the bottom or past the bottom. So, the question is, annual spend guidance raised by 1.5 points in the midpoint to 7.5 points from 6. So can you just unpack a little bit how much is upside versus your plan in the first half of FY 2022? How much is it around better market conditions, and how much is more, sort of execution specific like lower E&C attrition and APM wins? Thank you.

29:19 Okay. Well, Andrew, it's a combination of a number of factors. I'd like to think that our execution in the last few quarters has improved significantly and that's a contributor. Two, no doubt that our customers are now spending more money. 29:50 Clearly, the sales cycles are back to pre-pandemic levels. Deals are now being escalated to the C-suite for final approval and that gives us also the better predictability. And then there's a, sort of improvement in the macro, which is driving gross growth and supported by the spending, but also, I think as the macro has improved attrition, we're getting better insights into how we can reduce attrition. 30:29 And the raise in the guidance is a combination of expectation that will drive some increase in new growth, gross growth, but also that reduction of 0.5 to 1 point of attrition and that supports, sort of from the mid-point, the 1.5 point of increase in the guidance.

30:56 Alright. Thank you.

30:59 Thank you.

31:00 Our next question comes from Rob Oliver with Baird. Your line is open.

31:06 Great. Thank you very much. Good evening, guys. Appreciate you taking my questions. I had two, one, Antonio, just to start, so nice commentary about the core refining customers really coming back strong. You know, you’ve said it even particular that nice Aspen Mtell [win] [ph] and I think you mentioned that the sales cycles are shortening. I'm just curious, it seems like there might be a bit of pent up demand there for some of those APM related projects and general projects. So, just wanted to kind of maybe get a sense for how much do you think, how much of this issue think is pent-up demand from stuff that was shelved during the pandemic and how much of it represents, sort of ongoing opportunity? And then I had a quick follow-up.

31:59 Yes. Yeah. Well, look specifically around APM, the fact is, the majority of the growth that we deliver in the first half of the year for APM came in Q2. Q1 was a challenging quarter for APM. So, the real pickup in the demand for APM in the first half of the year was in the Q2 quarter. 32:29 And I do think like we saw in Q1 with our engineering and MSC suite and then also in Q2, they are somewhat of that pent-up demand. I mean, our Q3 and Q4 quarters, fiscal 2021 were quite constrained from an Aspen standpoint by customers. Customers have remained very interested in our technologies. 32:50 The demand has been there, the engagement, the conversations, and then in Q1 we saw that sort of release as a macro improved, especially oil prices in engineer on MSC. We saw some of that now with APM and look, all the key indicators that we track are open to the ride, they are green. 33:18 We believe that through commentary from our customers through analysis of an analyst in the market, budgets will be better. Our own research through the survey that we conducted last year, which in a way gives us the confidence to raise the guidance and believe in that, you know both APM and our engineering and MSC Suites will have stronger demand. We're a month into our Q3 quarter. We have good visibility in the quarter and Q4 normally is our strongest quarter of the fiscal year. So, we've raised our guidance with a lot of insight and visibility into our pipeline.

34:03 That’s great.

34:03 Yes. The other thing I was going to add – sorry Rob, the thing I was going to add to that point is, yes, the one hypothesis, which I assume is in your question, but as a team we are considering to make sure the great growth in the first half wasn't [pull-in] [ph], like it's not a – we just got the quarter, kind of profile or portfolio run. But given to Antonio’s point, we don't see it as a pull-in, we see it as actually the pent-up demand and quality in hygiene in our second half pipeline. So, that was one of the signs you’re looking for to your question.

34:34 That's great. No, thanks Chantelle. Thanks Antonio. And then, I just had one follow-up and it could be for either of you guys, just on, Antonio, you called out in the deals that you guys are always generous with the color around the deals in the quarter. And a bunch of that you referenced were ELAs and I think you guys had done a little bit of that with your APM business in the past, but I can't say, I recall you stressing ELA so much, having felt you guys for so many years, just was curious, if you could talk a little bit about what the ELA structure means and how if at all it differs and in our durations in these contracts similar to what we're used to with Aspen any color there would be helpful? Thanks again guys.

35:15 Yeah, thank you. So, let me start. So certainly, with APM, we've seen multi-site agreements and even a couple of enterprise agreements that cover a lot of sites. Especially in MSC, when it comes to technologies like APC and optimization, we're now seeing and this is a third of those agreements in about a year, a year's time actually going back to Q4 of last year, were customers with very clear intentions to capture emissions are focusing on a total rollout of our APC advanced control technologies to capture the emissions and the value. 36:18 Normally, we would see one of those not very often, but now within a year, we’ve seen three and it will – in my sense is that it will be a more common occurrence as our customers focus on accelerating the capture of the mission commitments, reduction in emission commitments that they've made, and therefore are willing to negotiate these agreements. 36:50 Look the agreements are still based on the tuck-in licensing model. We just give them enough tokens to do a complete rollout of the technology, but it's all part of the MSC suite and the token licensing system.

37:10 Thanks again.

37:12 Hope that answers your question, Rob?

37:14 It did. Thanks again, Antonio.

37:16 Yeah. Thank you.

37:18 Thank you. Our next question comes from Matt Pfau with William Blair. Your line is open.

37:24 Hi Matt.

37:26 Hey guys. Thanks for taking my questions. First, just wanted to ask on the Russia Ukraine situation, does that have any impact on your business at all?

37:37 Well, let me look at – we do, do business in Russia and we've talked about the performance of our Russian business in the past, but it is not that material to our overall business. Having said that, we have a great team in Russia that is working all the time to close business, but should something were to happen, we're confident that our guidance will hold and then we'll have to determine what it means fiscal year 2023 and going forward, but it is not that material to our overall business.

38:29 Got it. And then just wanted to ask about your acquisition strategy and if you look at the document that was filed related to the transaction and the timeline, how that went down last year? There were a few acquisition possibilities mentioned in there, not by name, but obviously that you were looking to acquire some businesses and it seemed like they could potentially be larger ones than maybe you’ve done historically. So, any sort of update you can provide in terms of how you're thinking about your acquisition strategy would be helpful?

39:06 Yes. Let me look at – when we announced a transaction back on October 11, we did say that part of the reasons for the transaction that we announcing with Emerson was to create a platform for us to become more acquisitive in the future. That's what we will say for now, we're working on closing the transaction. Once we close it, well then we’ll lift our head and see what's ahead, but the goal it's always been and we said so in October, that we want to be more acquisitive going forward once the transaction closes.

39:47 Yeah. And the other thing too that has not changed, but just to reinforce for the question is our framework of potential acquisitions of any size, support our double-digit growth strategy, brand spend and our annual spend operating margin framework of 47% to 50%. So, all of those things will be incorporated into any futures considerations.

40:11 Got it. Thanks a lot guys. Appreciate it.

40:14 Thank you, Matt.

40:16 Thank you. Our next question comes from Gal Munda with Berenberg. Your line is open.

40:23 Hi, Gal.

40:26 Hey, thank you for taking… Hi, Antonio, hi Chantelle. So, the first question I had was just, expanding a little bit on the ELAs that you mentioned, so you said that the third one in about a year that you talked about, which is interesting, is there a way to think about your, especially MSC customers and thinking about those priorities that they have and how many of those ELA deals could come? And I don't know if you can give us just some, sort of idea of what’s the uplift that those ELA’s come compared to the previous contracts that they had signs in terms of the ACV or annual spend or the way we look at it?

41:05 Yes. Well, let me look at it, Gal. My sense is that, but we all know that sustainability is an imperative, but achieving net zero carbon emissions by 2050 is a tall order. And therefore, my sense is that customers see themselves in a lot of urgency to start reducing their emissions. The low hanging fruit is through efficiencies through energy optimization reductions in energy consumption in their operations and so on. And this is what we do. We've been doing this for 40 years. And now it is – the spotlight is on it. 41:55 The focus was still on profitability. It has become equal or stronger on sustainability, which is what also excites us very much because you can deliver both profitability and sustainability using our technology. So, what we are seeing is, is this customer that already have a significant penetration in the use of our technology, multi-variable control and optimization in their assets. And normally in the past, they've been increasing the use or the deployment one unit at a time, one drink at a time. 42:38 And this imperative around sustainability is now driving them to say, no, we need to blanket all of our process unit and refineries or chemical plans, as quickly as possible with this technology so that we can account for those reduction and emissions. So, they are coming to the table and saying, look, we know we already have this entitlement, why would it take to do an enterprise agreement? 43:05 And then that's a negotiation and depending on how much penetration that customer has of the technology, well they are believed can be from a six figure number to seven figure number. So, my sense is that, we will see some of those with greater occurrence or frequency in the future.

43:33 That's really helpful. Thank you. And then the other comment you made, which was interesting was how the customers have responded to your pending transaction with Emerson software side. When you said there's a positive feedback coming, does that imply some sort of revenue synergies that you think you can then extract because of the – because of the tie-up, is it either in go-to-markets or just join products together. Maybe if you can just note the excitement from the customers, what were they saying that they like in the tie-up itself? Thank you.

44:12 Yes. I think from a customer standpoint is not necessarily about revenue synergies. From our standpoint is certainly about revenue synergies. Look, I think customers are seeing two great engineering technology companies coming together that are – they both – both companies are key strategic suppliers to them. 44:39 They rely on both companies for different technologies in different areas, but they also see the opportunity to bring together our solutions and create packaged solutions around sustainability emissions tracking. For example, greater productivity improvements and so on. 45:00 So, what they see – what they’d say is, a lot of logic around the transaction, the culture of the companies, the focus on innovation and technology, the common customer base and so on. And then, okay, they believe that there’s significant technical synergies between the two companies and they're looking forward to seeing those. 45:26 Of course, from our side is, it's something that I felt and we felt was part of the thesis for doing this with Emerson, and it's part of the revenue synergies that we talked about when we announced the transaction.

45:39 Yeah. And I think just in addition, the one thing I would add, Antonio is, the other thing that I've heard that I got very excited about is just the joint go to market capabilities between the sales teams, the partner channels, etcetera. So, I think that's also a very powerful thing that they're looking at. Just one more thing to add.

45:58 Thank you so much for answering the questions. I’ll get back in the queue. Thank you.

46:04 Thank you, Gal.

46:07 Thank you. [Operator Instructions] Our next question is from Jackson Ader with J.P. Morgan. Your line is open.

46:20 Hi, Jack.

46:22 Hi. Thanks for taking my questions guys. Antonio, you mentioned the budgets improving and the filing for [2022] [ph], I think, you know the outlook for 2022, I'm just curious how they compare to like the budget levels of say 2019? Are we back to those levels yet?

46:46 No, let me – and Jackson, time will tell. I don't necessarily think that we’re there yet. Look, if you read the analysis of the refining market in the calendar fourth quarter, meaning the December quarter, refining margins even exceeded some of the most recent margins and were somewhere back to 2010 levels. Sort of the golden years of refining margins, that sort of December. But we said in the October call that refining margins were back into the historical range, but at the low end of the range. 47:33 My sense is that refiners certainly see, and we’ve also heard CEOs from some of the refining companies talk about much better outlook for 2022. So, my sense is that their budgets for 2022 will be much better. When they were setting them, they were still somewhere towards the low end of the range, but nonetheless there'll be much better and we’re in 2021 and 2020. 48:10 So, are they going to be back to 2019? Time will tell. But I do see based on what we saw in Q4 in our, sorry, our Q2 quarter, the December quarter that these customers are now ready to spend and that's what our guidance reflects.

48:36 Okay. Alright, great. And then a follow-up on the APM suite. It seems like the business broadly is seeing a lot of tailwinds. And I'm just curious, is there anything about the specific to APM that is easily explainable as to why that was kind of the only portion of the business that came in below what you're expecting in the first half?

49:02 Yes. I mean, just below our plan. The fact is that our plan was conservative, very conservative for APM in the first half of the year. We always felt that we needed new budgets in this calendar year for APM to really start seeing a lift-up. We saw that – we started to see that in Q2. Q1, I would call the trough for APM being Q1. 49:31 So, look, I think it's all about priorities in our customers organizations. If you read about the industry in that October, November period, it was a lot of material region about these companies starting to focus back on maintenance and reliability, which I think is what we saw in the quarter and I'm sure it will be reflected in the budgets for this calendar year. So, we're optimistic about it, but also cautious. So…

50:10 Okay. Alright, great. Thank you.

50:12 Thank you, Jackson.

50:14 Thank you. Our next question is from Mark Schappel with Loop Capital. Your line is open.

50:21 Hi, thank you for taking my question. Antonio, pharma and metals and mining were two areas of your business that we're receiving increased investment this year. I was wondering if you could just give us an update on the progress you're making on those fronts? And also, how did those businesses fair this quarter?

50:38 Yes. Well look we're going to give guidance on pharma or metals and mining because the fact to the matter is that business flows through our engineering MSC and APM suite, so a lot of what you hear about our engineer MSC and APM suite is also reflection of the contribution from those two industries. But what I'll give you, sort of at a high level around pharma is look, we now have a sales team that has been engaged with our customers in those industries is starting to gain traction and build pipeline, and we expect the contribution from the business to really start showing up here in the second half. 51:26 And the metals and mining has been an ongoing activity to our focus with APM on that sector. We saw business out of customers in the Q2 quarter and a little bit in the Q1 quarter as well. And really the step-up in investments in metals and mining will come in the second half of this year. And then certainly for fiscal year 2023. But look, part of the excitement around the Emerson transaction is also Emerson’s market position in Pharmaceuticals. In the space that they're in, in pharmaceutical software, they have an important market share. So, certainly, the Emerson will be an important channel to market for us in pharmaceuticals. 52:25 And then they have some capabilities in metals and mining, nothing like they have in pharma and we'll also try to leverage those, but pharmaceuticals, we hope to benefit from their presence in that industry.

52:41 Great. That's helpful. Thank you.

52:43 Yeah. Thank you, Mark.

52:45 Thank you. And this ends our Q&A session. I will turn the call back to Antonio Pietri for his final remarks.

52:54 Thank you, [Carmen] [ph], and thank you everyone for joining us today for this call. Look forward to participating in the different investor conferences and calls with you and investors over the coming months. Thanks everyone.

53:11 Thank you, everyone. This concludes today's conference. Thank you for participating, and you may now disconnect.