Earnings Call Insights: Adecco Group AG and Aspen Technology Inc Report Q2 and Q4 2024 Results

Adecco Group AG (AHEXF) Q2 2024 Earnings Call Transcript

Adecco Group AG (OTCPK:AHEXF) Q2 2024 Earnings Conference Call August 6, 2024 3:30 AM ET Company Participants Benita Barretto - Head, Investor Relations Denis Machuel - Chief Executive Officer Coram Williams - Chief Financial Officer Conference Call Participants Suhasini Varanasi - Goldman Sachs Andy Grobler - BNP Paribas Simona Sarli - Bank of America Remi Grenu - Morgan Stanley Rory McKenzie - UBS Afonso Osorio - Barclays Sylvia Barker - JPMorgan Kean Marden - Jefferies Gian-Marco Werro - ZKB Konrad Zomer - ABN AMRO-ODDO Operator Ladies and gentlemen, welcome to the Adecco Q2 Results 2024 Conference Call and Live Webcast. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Benita Barretto, Head of Investor Relations. Please go ahead, madam. Benita Barretto Good morning, and thank you for joining the Adecco Group's conference call today. I'm Benita Barretto, the Group's Head of Investor Relations. And with me today are the Adecco Group CEO, Denis Machuel; and CFO, Coram Williams. Before we begin, we want to draw your attention to the disclaimer on slide 2. Today's presentation will reference GAAP and non-GAAP financial results and operating metrics. This conference call will include forward-looking statements. These statements are based on assumptions as of today and are therefore subject to risks and uncertainties. Let me now hand over to Denis and the results report. Denis Machuel Thank you Benita, and a warm welcome to all of you who joined the call today. Let's turn to slide 3, which provides an overview of the quarter. The group delivered €5.8 billion in revenues, 2% lower on an organic 20 days adjusted basis. We delivered another quarter of strong share gains and clear outperformance in challenging markets. The group grew 375 basis points ahead of its key competitors on top of 775 basis points in the Q2 period last year. The gross margin of 19.4% were 70 basis points lower year-on-year, it is a robust result that reflects the current business mix and firm pricing. We've delivered an above target €162 million of G&A savings run rate. And in Q2 G&A expenses were 19% lower than the 2022 baseline, supporting the group's EBITA of €179 million and 3.1% margin. Adjusted EPS was €0.64, 1% lower year-on-year on a constant currency basis. Net debt to EBITDA ended the quarter at three times, a 0.2 times reduction compared to the prior year's period. Cash performance improved, driven by good working capital management. Cash flow from operations was plus €162 million better by €82 million year-on-year and a cash conversion ratio was 84%. As part of the group's ongoing commitment to sustainable growth, we are pleased to announce that the Science Based Targets initiative has approved our 2030 and 2050 net-zero emission targets including detailed year-on-year reduction path. Let's now move to slide 4 and our strategic progress. We've consistently delivered against the Simplify, Execute and Grow plan, which was established to drive better, faster execution and improved financial performance. So to highlight a few achievements. The group has made significant strategic investments over the last two years, gaining substantial market share and positioning itself close to leading the market in revenue terms. These investments include for example adding capacity to consistently capture growth opportunities in Adecco APAC or Southern Europe, as well as the latest technologies such as AI-assisted coaching in EZRA. We've also protected capacity in more challenged markets where appropriate ensuring we are well-positioned to capitalize swiftly on a future recovery. By simplifying the way we work with strong execution, we have delivered €162 million in G&A savings net, and in run rate terms above the €150 million target. In gross terms this is an absolute reduction in spending of over €200 million and over 20%. The organization has been rightsized, the move to shared service centers accelerated and procurement policies tightened. Within strengthened group guardrails we've empowered decision-making and accountability by those closures to customers at the GBU and local levels. We have activated a value-driving tech roadmap with clear architecture, project prioritization and balance between global and local needs. With this, we plan to simplify the group's system landscape and increase capacity for innovation and disruptive technologies, harnessing data and AI to enhance our competitive edge. Last but not least, in HR, we are driving a group-wide values and culture initiative to support a collaborative transparent and high-performance culture with an absolute focus on clients and candidates. Moving now to, Slide 5 and more color on the G&A savings program. Since announcing the €150 million net target in Q4 2022, the group has methodically worked to achieve it. Supported by the task force which has worked with the GBUs countries and functions to identify actions and improve the speed of delivery. This disciplined execution has enabled us to overachieve. As of mid-2024, we've delivered €162 million in savings net and in run rate terms versus the 2022 baseline. €109 million of savings have come from simplifying and consolidating corporate enabling functions, including by shifting administrative tasks to offshore shared service centers, for finance and HR. €53 million of savings have been delivered from GBU and country structures, mainly by eliminating duplication and reducing the number of organizational layers. G&A headcount has decreased by 12%, while non-personnel cost cuts have driven €66 million of savings. For the Q2 period, G&A savings represent a 19% reduction versus the 2022 baseline, bringing G&A expenses to 3.4% of revenues. Looking forward, we have a clear plan to sustain G&A expenses below 3.5% of revenues per annum. Let me now hand over to Coram, who will provide details on the Q2 results. Coram Williams Thank you, Denis and good morning to everyone. Let's discuss the context within each GBU beginning with Adecco on Slide 6. Adecco has demonstrated resilience in challenging markets and delivered a solid performance. It took further market share with relative revenue growth of 220 basis points in the period at a market-leading profitability level. Revenues were €4.5 billion 2% lower year-on-year, on an organic trading days' adjusted basis. Flexible and permanent placement revenues were both 2% lower, while outsourcing activities were up 15%. On a sector basis growth was strong in retail and solid in logistics. However, demand was weak across the autos, manufacturing and IT tech sectors. Gross margin was healthy, with pricing firm. Gross profit per selling FTE rose 2% while selling FTEs reduced 4%, reflecting the agility with which we manage the business. The EBITA margin at 3.4% was 10 basis points lower reflecting lower volumes, geographic and solutions mix, substantially offset by better productivity G&A savings and the favorable timing of FESCO JV income. Slide 7, shows Adecco at the segment level. In France, revenues were 8% lower in a challenging market. The decline was broad-based with notable softness in manufacturing and logistics. France's EBITA margin mainly reflects negative operating leverage. Management remains focused on improving sales intensity and rightsizing to drive performance improvement. Revenues were 11% lower in Northern Europe including 12% lower in the U.K. and Ireland, 13% lower in the Nordics and 1% higher in Belux. Though the region performed well compared to competitors in sector terms; autos, consulting and manufacturing were subdued. DACH's performance was robust with revenues growing 1%. Germany was up 1%, reflecting a tougher market environment, while strongly outperforming competitors. Logistics, IT tech and retail were strong, while autos was slightly lower, mainly due to base effects. In Southern Europe and EEMENA, revenues grew 4% ahead of competitors. Iberia was up 10%, EEMENA was up 7%, and Italy was flat. Logistics, food and beverage and retail were strong. In the Americas, revenues were 5% lower. LatAm was up 13% led by Colombia. In North America, revenues were 14% lower reflecting continued market headwinds in flexible placement with lower demand from large enterprises. On a sector basis, retail was strong, while IT tech and autos were notably weak. The region's EBITA margin reflects lower volumes rightsizing efforts and calibrated investment in the U.S. network to drive future growth. In APAC, revenue growth was strong up 14% and firmly ahead of the market. Japan was up 11%; India up 13% and Asia up 7%. In Australia and New Zealand, revenues were 41% higher boosted by a significant government contract that started in Q3 2023. The EBITA margin of 6.6%, includes an impact from the favorable timing of the industry support fund at FESCO. On an underlying basis, the margin improved 10 basis points mainly reflecting higher volumes, the current business mix and disciplined cost management. Let's move to Akkodis on Slide 8. Akkodis' revenues were 2% lower year-on-year on an organic trading days adjusted basis. Staffing revenues were 17% lower challenged by the ongoing tech staffing market downturn. Consulting revenues were solid, up 4% year-on-year. EMEA was robust if mixed. Revenues in South EMEA were up 5%, with France up 5% reflecting good auto activity and strength in Spain and Italy. In North EMEA, revenues were 6% lower. Akkodis NXT formerly DataRespons was 7% lower reflecting weaker demand for software development expertise. Germany was 3% lower due to more challenging market conditions particularly in autos. North America revenues were 14% lower weighed by the continued downturn in tech staffing. Solutions revenues rose 30% organically. APAC revenues rose 9% with Japan up 7% led by tech staffing. Australia rose 9% with consulting up 34% organically. The EBITA margin at 4.9% was 30 basis points lower year-on-year. This result mainly reflects seasonality and market challenges in the U.S. and Germany, partially offset by disciplined cost management. By service line staffing margins were under pressure while consulting margins were broadly stable year-on-year. Let's turn to Slide 9 and LHH. Revenues in LHH were 7% lower year-on-year on an organic trading days adjusted basis. Recruitment Solutions revenues were 13% lower with the segment continuing to face market headwinds. Gross profits were 13% lower and U.S. gross profits were 17% lower both modestly improving sequentially. Productivity improved with FTAs reduced by 8% year-on-year as management exited low performers. At the same time, the team is protecting capacity and selectively hiring experienced consultants to capture a future rebound in market activity. Career transition was healthy in a strong comparison period with revenues 10% lower and good growth in Canada and France. It continues to take share with over 2,000 new clients year-to-date and its pipeline remains solid. Learning & Development revenues were 1% lower organically. EZRA performed very strongly with revenues growing 45% organically and a strong pipeline. General Assembly continued to pivot towards B2B, while Talent Development was subdued. Revenues in Pontoon was 7% higher, led by growth in Direct Sourcing activities. LHH's EBITA margin of 7.5% was 10 basis points lower year-on-year. The margin reflects lower volumes and changing mix, substantially countered by organizational optimization and good G&A savings. Let's turn to Slide 10. On the left, we review the group's gross margin drivers. In Q2, on a year-on-year basis and under the group's accounting policies effective January 1, 2024, currency translation and portfolio scope had a five basis point positive impact. Flexible placement had a negative impact of 20 basis points, mainly driven by the Adecco GBU's current geographic mix. Permanent placement had a 30 basis point negative impact, reflecting lower volumes, while career transition had a 10 basis point negative impact reflecting a strong comparison period. Outsourcing, consulting and other had a 15 basis point negative impact, mainly driven by lower volumes in Pontoons MSP and RPO services. In total, the gross margin was 70 basis points lower on a reported basis. At 19.4%, it is a robust result, reflecting current mix and firm pricing, as we can also see in gross profit developments year-on-year with the group down 5%, but Adecco only 2% lower in line with its revenue development. On the right, we review the year-on-year drivers of the group's EBITA margin this quarter. At 3.1%, the EBITA margin was stable year-on-year. Gross margin developments were fully offset by a five basis point positive impact from productivity improvement, a 45 basis point positive impact from G&A savings with costs down 11% year-on-year and 20 basis points positive impact from favorable timing of FESCO JV income. Let's turn to Slide 11 and the group's cash flow and financing structure. As you will recall, the group's cash flow generation is seasonal with H1 usually being a cash-out and H2 usually being a cash-in period. Cash performance improved with cash conversion at 84% over the last 12 months from 73% in Q1. Q2 operating cash flow was up €82 million year-on-year at plus €162 million. It benefited from favorable working capital development of €116 million supported by good working capital management. DSO improved by half-a-day year-on-year to 52.5 days. Free cash flow was €100 million higher year-on-year at €128 million supported by lower capital expenditures. Let me touch on the financing structure. Net debt-to-EBITDA was 3x at the end of Q2, reflecting a seasonal peak due to the dividend distribution and 0.2x lower year-on-year. The group has a solid financial structure with fixed interest rates on 81% of its outstanding gross debt, no financial covenants on any of its outstanding debts and strong liquidity resources including an undrawn €750 million revolving credit facility. The group remains firmly committed to deleveraging supported by productivity gains, G&A cost reductions, lower one-off charges now that we've delivered the savings program and lower capital expenditure. Let's turn to Slide 12 and the group's outlook. Revenue developments in Q3 2024 are expected to be similar to those in Q2 2024 on a year-on-year trading days adjusted basis with market conditions likely to remain challenging. The group will focus on sustaining G&A savings whilst continuing to position capacity to capture growth opportunities and market share. In Q3 2024, the group expects its gross margin to improve sequentially in line with a normal seasonal movement of 40 to 50 basis points. The group expects a modest reduction in SG&A expenses in the region of €15 million to €20 million from the €969 million reported this Q2 2024 excluding one-offs. And with that I'll hand back to Denis. Denis Machuel Thank you, Coram. Let's turn to Slide 13. In Q2, the group continued to progress its strategy and execute in a methodical disciplined way. The efforts have significantly strengthened the business. We've delivered strong share gains for eight consecutive quarters. We've over-delivered on savings, achieving €162 million savings net in run rate terms. Looking forward, we will further progress to simplify execute and grow agenda. We have a clear plan to sustain G&A expenses below 3.5% of revenues per annum. Moreover, we are determined to continue outperforming the sector and are managing frontline resources with agility to enable us to benefit swiftly when labor markets improve. Thank you for your attention and let's now open the lines for Q&A. Operator, we are ready for the first question. Question-and-Answer Session Operator We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Suhasini Varanasi from Goldman Sachs. Suhasini Varanasi Hi, good morning. Thank you for taking my questions. I have two please. When you think about the original guidance on gross margins for 2Q that you gave with the 1Q results in May, it was supposed to be broadly in line with the 1Q levels of 19.8% versus where you actually landed up which was 40 basis points lower. Can you maybe discuss what changed versus your original expectations and the degree of confidence you have on the gross profit guidance for the next quarter? Second question, in July, your credit rating on your debt was changed. The outlook I think has changed from negative to stable and this raised some concerns I think among your credit investors. So, do you have any plans to accelerate the deleveraging process on the balance sheet to help at least some of those concerns there? Thank you. Coram Williams Good morning Suhasini. This is Coram. I'll cover both of those questions. On gross margin in Q2 we did guide for broadly in line and obviously came in a little bit lower than that on 19.4%. We think that is a healthy result. And probably the two things that were slightly lower than we'd expected were perm where it was down 30 basis points and we guided towards 10% and flex which was down 20% when we've guided towards being down 10%. So, these are not major movements. And I think the key point about gross margin is that it's really all about the current business mix right now. It's about the pressures that we continue to see in perm. It's the geographic mix in Adecco with the lower gross margin countries growing faster than the higher gross margin countries, but there is nothing structural happening in our gross margin. It's all about mix. Our pricing is firm. The spread between bill rate and pay rate was up again year-on-year in Q2. And as I mentioned in my script, the Adecco gross margin was down by the same amount as the revenue line. Again that signify that our pricing is firm and we're using dynamic pricing where it's appropriate to capture the value of the services that we bring. So, I have good confidence that we will improve sequentially in the way that we've described for Q3. On the S&P change, I mean let's be clear, we still have a very high investment-grade credit rating. It is BBB+ Baa1. The only thing that S&P moved was the outlook and as is clear from their report the reason that they did that was not about the execution of the business which actually they commended it's about the macroeconomic challenges that we continue to face. Our balance sheet is strong. We've got no financial covenants, no outstanding commercial paper, strong liquidity. And as I outlined in my remarks, we've got a very clear plan for deleveraging and we do that through productivity improvements, the flow-through of the G&A savings, which we've delivered above target, lower one-offs now that we're largely through our G&A cost reduction and lower CapEx. And there's tangible progress that you're seeing, in the Q2 numbers, because our operating cash flow is up over €80 million. Our free cash flow is up €100 million and our leverage has actually come down year-on-year, in a seasonally high leverage quarter. Suhasini Varanasi Thank you very much. Operator The next question comes from Andy Grobler from BNP Paribas. Please go ahead. Q - Andy Grobler Hi. Good morning. Two from me, as well, if I may. Firstly, just sticking with cash flow. DSOs improved during the quarter. To what extent, do you think that improvement is sustainable? Or is there further to go on that metric? And then secondly, just from a demand perspective, given some of the macro uncertainties that surround us, are there any signs of a change in behavior from your clients either positive or negative in recent weeks? Thanks very much. Coram Williams Thanks, Andy. I'll take the first one and Denis will pick up on the second one. We're really pleased, with our DSO performance. We've had a real focus, as you know, on cash flow. You're seeing the tangible results of that in the Q2. And one of the levers that we've got is obviously around DSO, and a half-day improvement in DSO for the group is worth somewhere between €35 million and €40 million of cash. So this is a real focus for us. And you can see for the market and the industry as a whole, actually DSO is going the other way. So, I think our focus is paying off. We will continue to really home in on this, to make sure that we drive further benefits in operating cash flow. We've incentivized on operating cash flow as a metric, which means that management is really homing in on it and we believe it's sustainable. Denis Machuel And on the demand as we said in our outlook, we don't see any major changes. In the Q3, we said that our revenue development will be more or less in line in Q2. So we expect the regions that have been performing and there are several -- in this past quarter, to continue. I think we have good traction in APAC, good traction in Latin America, good traction in Southern Europe, Eastern Europe. So having -- we have some signs that there are some supportive economies around. Of course, there are places where markets are more challenging and we adapt our capacity to that. So I think what we are very agile, in making sure that we adjust our resources. One thing, that could -- that's interesting to look at is, the trends in recruitment solutions LHH particularly in the US and also the tech staffing in the US. What we've seen, I mean these are difficult markets. As you could see year-on-year, we're down. But sequentially, we've seen signs of stabilization. And so on these things, we believe that we are at a trough, let's be clear. We haven't seen an inflection yet, but we don't think it's going to get worse. And we are positioning ourselves for the rebound. That's what Coram mentioned in his remarks as well. We are protecting capacity, we've recruited some good people particularly in LHH to make sure that we are ready to accelerate as soon as the markets restart. Q - Andy Grobler Excellent. Thank you. Operator Next question comes from Simona Sarli from Bank of America. Please go ahead. Q - Simona Sarli Yes, good morning. And thanks for taking the questions. So on -- first of all, on gross profit margin, you have indicated that it will be sequentially up with the normal seasonality patterns so the plus 40 50 basis points quarter-over-quarter. If you can please explain, how comfortable you are with that especially, in the context where your main competitors are actually being a little bit more conservative and indicating only like a small improvement of up to 20 basis points. Secondly, on the reduction in G&A of €15 million to €20 million, how much of that is related to temporarily the adjustments in capacity and how much more it will be sustainable in study in the medium term? And lastly, on your CapEx guidance for 2024 you are cutting that from €180 million to €150 million. So part of that is of course related to Q2 but for the balance of that what is guiding this reduction? Coram Williams Thank you, Simona. I will take all three of those questions. On gross margin as I mentioned we are confident that we will see the sequential improvement in line with seasonality. Clearly, that implies there's no major change in trends and that's very consistent I think with our revenue guidance. And I can't comment obviously on what competitors are guiding towards but I would say we have a slightly different mix. So we are confident in our view on gross margin and I think it is consistent with what we're saying about the trends that we see in the market. On SG&A the €15 million to €20 million reduction obviously the part of that is the flow-through of the additional run rate the over-delivery on G&A savings that we've seen at the end of Q2 and that will flow through in Q3 and Q4. But there's a small amount of it where we're expecting to adjust capacity. To be clear you've seen us do this all the way through the last few quarters where there are opportunities for investment to drive growth and to take share then we will increase our selling capacity, and where we find markets that are challenged, obviously, we reduced selling capacity. We have flexibility in that part of the cost base but as Denis mentioned, we also protect capacity to make sure that we can really capture rebound. You've got to be a bit careful because the base moves around. So there'll probably be a little less G&A savings in Q3 and a little bit more in Q4. And then finally on CapEx. I mean a big driver of this is obviously that Q1 and Q2 were lower than we had been anticipating and certainly lower than this time last year. Part of that is because we had elevated CapEx levels in 2023, because of the contract that we won in Australia the big government outsourcing contract. But it also reflects I think the focus that we've got on making sure that all aspects of our cash flow are managed effectively and that we're being disciplined in the way that we manage our CapEx spend. It doesn't mean we're slowing down the investment that we need. That's not the case but it is about being disciplined and making sure that we are spending what is appropriate. Simona Sarli Thank you. And can you please help just a clarification on the gross profit margin because clearly in Q2 it came in a little bit softer than expected in term and also flat in order to deliver this 40 to 50 basis points of sequential improvement, are you therefore assuming that there are going to be an improvement in both impairment flex? Coram Williams No. There's no -- so I think you've got to distinguish between the sequential improvement, which is effectively in line with seasonality but that obviously would put us 50-or-so basis points down year-on-year. And just to clarify, where that's coming from probably about 15 bps on career transition, because obviously while that business is still at pretty high levels. We can't sustain given the comps that we've got in the second half of last year. A little bit of downside around 10 basis points on OCS Outsourcing and Consulting largely because of the mix in Pontoon and a 20 to 30 basis point year-on-year decline in flex because of the geographic mix in Adecco. So but please just be careful about distinguishing what we're saying on sequential and what that means year-on-year. Simona Sarli Thank you. Operator The next question comes from Remi Grenu from Morgan Stanley. Please go ahead. Remi Grenu Good morning, and thanks for taking my question, I've got a few. The first one is that there seems to be a clear divergence in performance between Southern Europe and Northern Europe and North America on the other side, which have been weaker. So if you could give us more flavor on what's driving that? And if you have any discussion with clients which would give an idea of what are the underlying drivers of that divergence? That's the first question. The second one is on what's your view on the outlook in the US in the context of what we've seen in some of data the labor markets were loosening and your comment on temp activity in that country being subdued. So yes, it would be interesting to have a view on the outlook there? And then the last question relates to the working capital improvements. My understanding was that this divergence in performance was driving between Southern and Northern Europe was also driving a negative working capital effect because in Southern Europe, the working capital might be a little bit higher than in Northern Europe. So just correct me if I'm wrong on that. And if that's the case, I think it would be interesting to have a bit better view on what's driving that improvement in DSO? And if it has offset that kind of potential negative mix effect in Europe? Coram Williams Denis will take the first two and I'll pick up on the working capital piece, Remi. Denis Machuel Absolutely. Thanks Remi. So first of all on the geographies, definitely, I mean I would say, the major factor for the difference is the macros in these countries. We definitely have good dynamic in Southern Europe, Italy is flat versus the Northern Europe down. We have Spain, which is growing strongly. We have other parts of the world, as I mentioned earlier, that are quite solid. So I think it's mainly macros. And clients are -- there's no major difference in the client conversations than what we had before. They adapt to their own markets. So North America is a market where there has been -- post-COVID there was a lot of recruitment after the great resignation there was a lot of recruitment and companies are sort of staying at the level of improvement that they had just after this big effort that they made in 2022 to recruit. So at the moment, it's more or less stable. The temp market in the US is at historic low. The temp penetration is quite low and it's across the whole temp industry. So yes, we hear the increase in unemployment in the US labor market. It's difficult to anticipate what's going to happen in the next quarters. Of course, the political uncertainty creates economic uncertainty that doesn't help. What we know is the plan that we have in the US is delivering and that's what matters to us. As you know, we have a turnaround plan that is underway and it is delivering results. So we believe that quarter-after-quarter we are in a good place to capture any type of rebound. Now, it's too early to say whether this -- when this is going to come. Coram Williams And let me pick up on the working capital point. I mean Remi you're right that when a business is growing it absorbs working capital and when a business is declining then it tends to release. So, all other things being equal you'd have very modest absorption of working capital in Southern Europe and a modest release of working capital in Northern Europe. And obviously, if I step back that's true for the group as a whole. So our sales line is down slightly. Obviously, a very strong competitive performance but that does mean that there has been a modest release of working capital. But -- and this is really important that DSO management, the 0.5-day improvement is a big driver of our operating cash flow. It's worth $35 million to $40 million of the $80 or so million upside. And then on top of that at the free cash flow level, you've got the CapEx benefits. So, I think it's really important to recognize, yes, there are working capital characteristics at play here but we've done a very good job of managing that, and improved DSO in challenging markets. Remi Grenu Okay. If I can just follow up on the environment in the US and that comment around temp penetration its being at a low level there. Is it something that you would consider as normal, given where we are in the cycle and the current environment? Or is there any structural reason which explains the decline in penetration or any of other drivers? Denis Machuel I don't think it's structural. It's - we are in a cyclical business. Again, there were some good momentum some years ago. And then post-COVID, as I said company has reopened the doors. There was an inflow of people and now it's more - so we had a historic high, if I go back two, three years ago and then now we are - companies are recalibrating. The political uncertainty doesn't help. So that's what explains where the industry is at the moment. Remi Grenu Okay. Understood. Thanks very much. Operator The next question comes from Rory McKenzie from UBS. Please go ahead. Rory McKenzie Good morning. It's Rory here. Three questions, please. And firstly on this point on the market share gains. I know you focus on the recent year-over-year growth trends. But I think your organic revenue itself declined sequentially in Q2 pretty similar to peers and is now back below the 2019 level. So it's hard for us to really see any gains this cycle overall. Are you trying to tell us that you've won more contracts or more wallet share and that will be more visible should market that actually turn? And then secondly on capacity. Again you talk about protecting capacity but I think your organic head count is also now back below the 2019 level and you're suggesting small further cuts in Q3. Whereas some peers have kept headcount at much higher levels. So how confident are you that you can capture a rebound overall? And also are you still confident in the usual recovery drop-through rate? I guess the concern would be that a lot of costs money to go back in to support a recovery. And then just finally a quick one on the FESCO JV that subsidy received in Q2, was that all cash in this quarter? And also what's the outlook for Q3 and Q4 JV income? Thank you. Coram Williams Denis will take the first and the second, and then I'll pick up on FESCO JV Denis Machuel Okay. So definitely when you look at the growth rates of main competitors, when you look at the market dynamic, we are gaining share. This is it. We are - yes, our revenue is declining. It's obvious. You've seen it minus 2% in Adecco, particularly - but our relative revenue growth is plus 120 basis points. So our markets are fragmented. So even though our revenue is declining, we are taking a big share of the market. This is it. So we are for the eighth consecutive quarter the growth pillar of our strategy of our simplified equity plan is delivering. So we - there and you highlighted the two elements of us gaining market share. Yes, with clients we increased our share of wallet because we are more efficient in the way we deliver our service, particularly in the temp business, speed is of the essence. So our systems, the digitization that we've put in our business, the way we interact with our associates, with our candidates, the faster the better we are able to interact with them, the better we are able to provide the clients with the necessary people. So that's how we gain share of wallet, particularly with the large accounts. The on-site business is getting traction. That's also a way to gain share. So - and on top of that we have focused our teams on prospects on reaching out to new clients and we've won also more contracts. So those two things are definitely levers that explain why we've gained share. And the omnichannel that we have implemented in several countries being the digital channel, the branch and the way we serve our large clients with career centers all that helps us be better than our competitors. Coram Williams On the - Sorry, this is Coram. Let me pick up on this point and add to Denis' answer on the, sort of, protecting capacity. I think I understand the point that you're making but I think it's really important to recognize if I compare Q2 2024 gross profit with Q2 2019 gross profit it's not down, it's actually slightly up. And we are being very dynamic in the way that we manage capacity. So we added headcount in Q2 in Southern Europe. We added into APAC. We added into LatAm and you can see that we're fueling the growth. And where there are pressures in the market obviously we are reducing head count but we are being very cognizant of the need to protect capacity and not cut to the bone. And there was a data point that I gave you in my script which is if you look at recruitment solutions particularly in the US, which is down mid-teens our head count down 8%. So we have been very careful to make sure that whilst we are managing to the recovery ratio we are not cutting capacity that will prevent us from being well-positioned to capture the recovery. That is a very clear part of our strategy. And we manage according to the gross profit per FTE. And just on that data point it's also up. So if I look at Q2 2024 we're at 32.2. If I look at Q2 2019 we're at 28.4. So there's been a productivity gain as well during that period. So understand the challenge but we are being very careful in terms of the way that we're managing this. We're driving productivity and we're protecting capacity to make sure that we continue to gain share particularly when the recovery comes. On FESCO I want to just be clear on this one. The industry support fund is something that happens every year. It is a way of incentivizing employment in China. We have a very good business in China. It's growing nicely. It's got good profitability characteristics even without the industry support fund. But we never quite know when in the year that subsidy is going to come. It came in Q1 of last year Q2 of this year so we would not expect further subsidies in Q3 or Q4 and that means you should work on a contribution from the FESCO JV of around €5 million per quarter in Q3 and Q4. The cash has been received in FESCO but obviously we received a dividend from FESCO later in the year. So I hope that helps. Rory Mckenzie Yes, that does. Thank you. Just to come back on that point you made on the capacity point Coram. Yes, obviously, we're struggling to deal with the aggregate metrics and you have the sub-details which maybe help more -- I guess most profit going from Q2 2019 to Q2 2024 have seen a very large acquisition contribution and the unique inflation cycle. So I guess it's hard for us to pick out from that there's any real structural expansion or rebound potential in the group if you see what I mean. But maybe you can follow it up at a different time. Thank you. Coram Williams No problem. Look at the data points that we're providing in terms of -- and because I think Recruitment Solutions is the best example of this. We could have cut that capacity further. We could have driven a higher short-term margin, but we have very deliberately chosen not to leave all capacity but to focus on performance management to exit weaker performers and to retain a strong sales base which will really allow us to grow when that market comes back which it will. Rory Mckenzie Thank you. Operator The next question comes from Afonso Osorio from Barclays. Please go ahead. Afonso Osorio Hello. Good morning. Thank you for taking my question. I have just a few last questions if I may. Firstly on growth just wondering if how you finished the quarter if it was probably the same April, May and June. So the exit in June would be interesting to know. And then what you've seen so far this quarter as for July and the beginning of August. And then secondly, Coram on the pricing environment I think you touched briefly earlier in Suhasini's question. If you can just expand a little bit on your spread in Q2? And you said it was quite strong in Q2. So I was just wondering if region-by-region that was broadly the same, or if there's like weakness or a strong performances in specific countries? And then finally on the exceptional charges, I note the €58 million so far this year. You're still guiding for the €19 million for the full year. So just wondering if you -- what's left to do here in the second half on the exceptional front? Is it a function of the further reduction in the sales force? And if so where are you making these adjustments? And then just lastly if I may on the regional growth dynamics, I noticed like Italy, which has been super strong for you recently now flat growth and also UK deteriorating a little bit as well in Q2. So if you can comment a little bit on those two countries and what do you expect for the second half? Thank you. Coram Williams No problem. Afonso, I'll take the first three and then I think Denis will comment on Italy and the UK. On sales in the quarter and into July there are as you know some really big trading day adjustment on a month-by-month basis, because of the timing of Easter, because of the timing of public holidays, et cetera in Q2. So it's actually really difficult to talk about the phasing of the months within the quarter. In July itself is not a particularly important month, because it's the lead into the summer vacation. So I think the key point on revenue is that we've seen some pretty consistent trends, some areas of growth, some areas of pressure. And as Denis has described in some of those key areas such as Recruitment Solutions and tech staffing, we have seen stabilization and very modest sequential improvement from a -- on a quarter-by-quarter basis. So it's why we are guiding towards similar revenue development in Q3. On pricing, I think we've demonstrated that we've been very effective on this over a number of quarters. We are very focused on dynamic pricing to capture the value of scarcity where we see it. The spread between bill rate and pay rate in Q3 was up, 3% for the G12 countries, which is a good result. And in terms of are there big movements within the countries? No, it's pretty consistent. Because this is an area of focus for us and there's real discipline in terms of the way that we're managing pricing. On the one-offs, absolutely we are sticking to the €90 million of guidance for the full year. The reason we're running slightly ahead of guidance at the half year is obviously that we actually took extra actions to deliver the €162 million of run rate savings versus the €150 million target. So this is one area where us being slightly above our guidance actually I think is a good sign in terms of the actions that we've taken. There's always a little bit more that we can do on G&A, it won't be of the same order of magnitude that you've seen. We are now largely done with our G&A savings program. So any further one-offs will be about the adjustments to capacity that we will make, but we are sticking to the €90 million of guidance for the full year. Denis Machuel Yeah. And on Italy and UK, I think it's mainly a market trend. We've seen in the UK some of our large clients having some decline. We have lower volumes on our on-site clients in the UK. We see perm also slowing down. So that's -- but it's more or less in line with the market. In Italy, same thing, I think we have a mixed situation but it's more or less a slowdown on market. What's striking is the difference between Italy and Spain. Spain the economy is good and we have excellent performance. But it's mainly linked to I would say market conditions. Afonso Osorio Okay. Thank you very much. Operator The next question comes from Sylvia Barker from JPMorgan. Please go ahead. Sylvia Barker Thank you. Hi, good morning. Two questions from me please. Firstly, just to understand the point around reaching a trough in parts of your end markets. So you mentioned Recruitment Solutions and IT staffing. I guess if you look at the numbers on perm the decline was better in Q2 than Q1, but on a let's say a 2-year stack basis, it was still a bit weaker. So, what -- I guess what end markets within that are you seeing reach a trough specifically? Then secondly on Germany plus one, can you just update us on the logistics contract that you won? And how much the contribution from larger contracts that you have won and are transitioning and how much is the underlying decline within Germany obviously a much better performance than the end market overall? And then finally, US temp volumes at all-time lows that was a quite interesting place to be. If you look at your portfolio, can you just help us with some thoughts around what -- again what markets and industries are driving that today? Thank you. Denis Machuel So yes, so on the Recruitment Solutions and tech staffing, definitely we've seen stabilization in many countries. We've seen stabilization in the US. We've seen stabilization in France. So I think we are -- we believe that we've again probably we are probably at a lower end of the cycle. Now, as I said, it's difficult to anticipate that things are going to get better soon. But we mentioned in the past that some clients who are more cautious, some candidates were also more cautious. There were people dropping in the process in the past couple of quarters because of the -- probably the economic uncertainty that doesn't help and that has driven the decline. Now, as we said, we see signs of stabilization. That's quite positive. Coram Williams Let me pick up on the second and third question. So, on Germany, I'm saying this with a small, but I'm not sure I quite accept that stripping out a contract win and market share it gets you to an underlying number because at the end of the day that's how we run the business. We have to win it. And we're very pleased with our performance in Germany. Clearly some of that came from logistics. But also I think we saw an autos segment which whilst it was down slightly low to mid-single digits that's on the back of a comp in '22, in '23 where we were up 34%. And I think others in the industry have found it much heavier going in auto. So, I think the German business is actually doing a very good job of winning share, taking share. And you can also see there is obviously an improvement in the margin in that business which reflects the leverage -- the operating leverage and cost savings that we've driven there. I will step back though and say, there will be some headwinds in Q3 for the group as a whole because of logistics. We have some very strong comps. We did win a lot of business not just in Germany in Q3 of last year and it will be difficult for us to replicate those growth rates. And I think you should work on the basis that it's probably a headwind in the Adecco GBU of about one percentage point. So I hope that gives you a steer. On the US temp volumes I mean Denis touched on the market environment which is clearly impacted by macroeconomic uncertainty. I think in terms of sectors that have done well, we've seen retail which has been very positive. We've seen good traction in the small and medium enterprises. As both of us mentioned in our remarks, the larger enterprises have been a bit more subdued. And then IT tech has been soft and autos have been weak. So it's a bit of a mixed picture in terms of sectors. I think the key point on the U.S. is that we continue to drive the turnaround. So we're really focusing in difficult markets or making sure that we've got good sales intensity that we've got really strong performance management the right branch network and we are positioned to capture the growth when the market comes back which it will. Denis Machuel And to give you -- to complement with some color on what Coram said was talking about small and medium businesses. There is an overall market, which is declining double-digit. Our SME business is only minus 1% year-on-year minus 1%. So that shows that there are places where particularly if you put the right energy if you revitalize the branches as we are doing you can outperform the market. Sylvia Barker Thank you very much both. Operator The next question comes from Kean Marden from Jefferies. Please go ahead. Kean Marden Thanks. Good morning. Most of mine have been asked. So I have two very quick ones for Coram if I may. Just first of all, did your receivables factoring utilization remain unchanged in the second quarter, which I think to recall was about €120 million? And then secondly, do you have any initiatives under consideration that likely to assist with deleverage in the second half over and both the normal working capital discipline. So in here things maybe like asset disposals like a property or social security receivable books? Coram Williams No major changes in factoring in Q2. The €120 million is a full year number. It moves around a little bit as you'd expect in line with sales. But was not a big driver of the working capital benefits. As I mentioned, I think the key thing here is the way that we've been managing DSO and that 0.5-day improvement year-on-year. In terms of the initiatives to delever in H2 beyond working capital, I mean, there's nothing that we're considering like a disposal or last year you saw some small property sales, I'm not going to see anything like that. I don't think in H2. But I think the key point is if you think about our four components of our plan for deleveraging, productivity G&A cost savings lower one-offs and lower CapEx. You will see more traction on a number of those in H2 than we've seen in H1. So G&A flow through increases in H2, because of the run rate. We see lower one-offs because we're now largely through the G&A initiative and we continue to get the benefits of lower CapEx. So it's organic, but we're very confident in our plan. Kean Marden Very helpful. Good luck on the next talk once again. Coram Williams Thank you. Operator The next question comes from Gian-Marco Werro from ZKB. Please go ahead Gian-Marco Werro Good morning, Denis and Coram. Congrats to the strong operational improvements and walking the talk. And two questions from my side. The first one is on your business in France. We talked on many industries, but maybe you can also give us a bit more details and also your outlook for development in France. Recently you mentioned that it might be relatively quiet now around Olympics, but after the Olympic Games we might see some changes, of course, also from a political perspective, I would just wonder about your view here in this core market. Then on the other side also for LHH you mentioned that you are ready to accelerate the business. Is that mostly -- you are mostly referring here to the Recruitment Solution business where you see some improvements? Or do you also some triggers or operational improvements maybe also in Learning & Development General Assembly for example that we currently overlook where you are working on something to maybe also grow your business further. Denis Machuel Thank you. So, yes, on France so the overall market is down. We are a little bit below the market trend and I'm not happy about that. As you can imagine it's for several quarters several years I would say larger players have been more impacted than smaller ones. We are really -- we have a clear action plan to reduce the gap versus the market we are adjusting okay to this downside market. So we're balancing capacity. We focused our cost base and our cost base as flexibility and we adjusted to market conditions. So our pricing -- so there are some good things in France. Our pricing plan is showing improvement. We've reduced the volume gap versus the market in Q2 versus Q1. We are a bit suffering from some of our large clients that have structural elements where they reduce their temp workers services. So we are really focusing on improving the delivery to our large clients who are service centers and this is getting good traction. And we are accelerating our on-site development. We've improved our sales efficiency on the SME segment between April-June. So there are things that give us some positive perspective. However, the French market is going to be still difficult for the quarters to come. Political uncertainty obviously doesn't help macros. The Olympics on our side won't have a big impact. We were not part of the big sponsors which we felt it was too expensive. And so we'll have to look at whether -- let's be clear. We can look at after the Olympics whether the business that's going to grow is it going to be the CT business? Or is it going to be the recruitment solutions business. In both cases we are I'd say in a good place to capture whatever happens. We are really adjusting our cost to the situation at the moment. That's a big focus on I want to improve our margin in France in the coming quarters. We have a plan on that. We have some positive signs that this is going to happen. On LHH, yes, definitely if I -- LHH and the big thing is of course the US that's what has the biggest impact. As I said the stabilization is happening in Recruitment Solutions. That's good. No signs of positive inflection yet but it's -- I'd say it's a bit reassuring for the future. We have the career transition even though it's minus 10% in the revenue it's still at a very, very high level. The minus EUR 10 compares to a very, very high level last year when we had all the tech restructuring plans that we were accompanying and we had captured almost all of them. So that's good. We are still winning business. And particularly in France we have more traction in CT. So we've -- I'm still positive in terms of the overall level of activity that CT has. And as you know that feeds our gross margin in a very nice way. I'm very pleased with what EZRA is doing. We're growing 45%. We have great traction and that is going to continue. It really captures a lot of interest from clients that want to do a cultural change. They have to do so many transformation to do a positive. And then on GA, yes, we see operational improvements. We are shifting GA from a B2C business into a B2B business that has better margins, more sustainability. And so I believe that GA will really have a path to better results in the quarters to come. Gian-Marco Werro Many thanks and all the best. Denis Machuel Thank you. Coram Williams Thank you. Operator The next question comes from Konrad Zomer from ABN AMRO-ODDO. Please go ahead. Konrad Zomer Hi. Good morning. Thanks for taking my questions. The first one on the North American business. Can you share with us what percentage of your revenues is with the Magnificent Seven please? The second question is on leverage. I think you've done a really good job in terms of getting the G&A savings in gaining market share. Your free cash flow was up significantly. You've showed to investors that you're able to control your cost base very well. However, on a structural basis, your leverage has not really come down in the last few years despite the fact that you keep telling us that you are very adamant to bring it down. I'm just wondering with all the low-hanging fruit done and most of the G&A expense is now completed, do you not think it becomes more difficult to bring your leverage down going forward? And then my last question, I'm sure you've heard the stories in the market partly fueled by comments you may have made yourself about the dividend not necessarily being sacrosanct anymore. And obviously, we had the stories about potential disposals particularly Akkodis. Is there anything on this platform that you would like to share with us on your view on these sort of stories please? Thank you. Coram Williams So Denis will pick up number -- that your first question and then I'll touch on your second and third questions. Denis Machuel Right. So with regards to the Magnificent Seven, they are our clients. We don't -- obviously, we don't communicate on the numbers but it's not massive. It's not material. Obviously, they are our clients because we have to play with them. I mean we're -- and as you know, the CT business has been really surfing on the Magnificent Seven restructuring two years ago and one year ago. And we work with our three GBUs actually. But there's nothing that is -- percentage is not massive. Coram Williams And let me pick up on leverage dividend under Akkodis. And Konrad we appreciate your comments about what we've done on G&A and operating cash flow and free cash flow. It's been part of a very, very disciplined operational execution. And I think you can see that we have developed a track record for gaining share, lowering costs and driving cash -- operating cash and free cash flow. Leverage is actually down 0.2 times in Q2. And I think that's important, because it shows that this effort is starting to pay off. And we've been clear that we would accelerate our deleveraging in the second half of this year and into 2025. And there's a very clear reason for that which is, up until now the G&A savings have not been at full flow. We've been referring significant ones in order to access them. And as you know, CapEx has been running slightly above the natural level for the business. So I think what we're seeing is very consistent with the way that we've described our path for deleveraging. And we've always said that we get through the G&A program in order for all flow through cash, along with the discipline on our working capital management. So we are confident we can delever. Our balance sheet is sound. And therefore we believe we have the financial flexibility to delever and continue to pay dividends. Denis, I think is going to comment on the market speculation on Akkodis. Denis Machuel Yeah. And well actually I'm not going to comment. As you know we don't comment on rumors. What I can say very clearly is Akkodis' score to our strategy, the Future@Work strategy is based on three pillars. The three GBUs Adecco, Akkodis and LHH that are complementary to each other and that provide our clients with an array of services that serves every type of need that they can have on talent and technology. This is what makes us unique. And that makes us super strong. And that makes us win market share. We are committed to our Future@Work strategy and Akkodis' score to it. Konrad Zomer That's clear. Thank you. Operator Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Denis Machuel, for any closing remarks. Denis Machuel Thank you very much. And thank you to all of you who attended the call. Just wanted to sum up where we are I believe, again, that we have a solid strategy and this strategy resonates with our clients. Over the past two years we have strengthened the company. And we have strengthened our execution. We have a proven capacity to execute on our plan simplify, execute and grow. We are -- as you know, we are adjusting our resources to market conditions. We have a positive view on the future. And we are ready to capture every single business opportunity that will be ahead of us. So we will -- we're ready. And I'm really positive to whatever can happen in the future, we're solid. Thank you very much for being with us today. Looking forward to our next interaction. Have a great day. Operator Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Aspen Technology, Inc. (AZPN) Q4 2024 Earnings Call Transcript

Brian Denyeau - Investor Relations Antonio Pietri - President and Chief Executive Officer Dave Baker - Chief Financial Officer Good day. Thank you for standing by. Welcome to AspenTech's Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note that the conference is being recorded. I will now hand the conference over your speaker host, Brian Denyeau. Please go ahead. Brian Denyeau Thank you, Olivia. Good afternoon, everyone, and thank you for joining us to discuss our financial results for the fourth quarter of fiscal 2024 ending June 30, 2024. With me on the call today are Antonio Pietri, AspenTech's President and CEO; and Dave Baker, AspenTech's CFO. Please note we have posted an earnings presentation on our IR website. This includes an explanation regarding the impact of ASC Topic 606 on our financial results. It also includes definitions of annual contract value, or ACV, bookings and free cash flow, among other metrics. We ask that investors refer to this presentation in conjunction with today's call. Starting on Slide 2, I want to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in today's press release and in our annual report on Form 10-K and other subsequent filings made with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this presentation, we'll present both GAAP and certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release and investor presentation, both of which are available on our Investor Relations website. With that, let me turn the call over to Antonio. Antonio? Antonio Pietri Thanks, Brian, and welcome to everyone joining us today. AspenTech delivered a strong fourth quarter to finish fiscal 2024. We achieved these results on the strength of our innovation and focused execution on a solid pipeline of business despite the persistence of a dynamic macro environment and cautious customer spending in some of our end markets. We were also pleased to see the benefits of our efficiency and productivity initiatives in the second half of fiscal 2024 come to fruition, delivering a favorable expense outcome for the full fiscal year. Our Q4 performance is a demonstration of what's possible as a result of our efforts over the past 2 years to integrate the Heritage AspenTech, DGM and SSE businesses while also transforming the DGM and SSE businesses. We believe these efforts are now largely completed, which coupled with our broad portfolio of mission-critical products, position AspenTech well to execute and deliver on an attractive combination of ACV growth and best-in-class profitability going forward. Additionally, we continue to make good progress in our commercial relationship with Emerson, and we expect these efforts to lead to further benefits in fiscal 2025 and beyond. Turning to Slide 3 for our Q4 and fiscal 2024 results. ACV was $968 million in the fourth quarter, representing 9.4% year-over-year growth and 3.5% sequential growth. Free cash flow was $335 million in fiscal 2024, slightly below our guidance and $153 million in the fourth quarter. I would also like to provide an update on our exit from Russia announced earlier today. We're exiting Russia following the U.S. government's recent announcement of expanded sanctions in the country prohibiting among other actions, the sales, service, maintenance and support of enterprise management software and design and manufacturing software in the Russian market. As a result of these measures and our exit from the Russian market, we have written off certain assets that are related to our operations in the country. From an ACV perspective, we have written off all Russia ACV for a reduction of approximately $35 million in our total ACV balance as of the end of fiscal 2024. Our new ACV balance is $933 million after adjusting to reflect the impact of this reduction. We have included tables in the appendix of our earnings presentations to help bridge these numbers for investors. Dave will address the other related areas in his remarks. As you will remember, we moved to renewals only in Russia in fiscal 2024. The contribution from this business in fiscal 2023 made it apparent that it was no longer going to be a material - was no longer going to be material to our overall growth profile resulting from the continued expansion of sanctions on the country. When removing all Russia ACV from our results, our fiscal 2023 growth rate improved 60 basis points from 11.8% to 12.4% year-over-year, while our fiscal 2024 growth rate also improved 60 basis points from 9.4% to 10% year-over-year. Relatedly, attrition in fiscal 2024 was 5.6% when including Russia ACV compared to 4.7% in the same period when removing Russia ACV. Now returning to our results, I would like to emphasize the following regarding our Q4 and fiscal 2024 outcomes. First, as I mentioned at the start, our performance in Q4 demonstrates the benefit of our transformation and integration efforts to bring together Heritage AspenTech, DGM and SSE and investments made over the past 2 years. The outcome achieved was execution-driven leveraging the platform built. We were also pleased to see the initial benefits from the sales expansion efforts made across the portfolio as we continue to advance and mature our business in these areas. Second, our innovation remains highly relevant and mission-critical to customers in asset-intensive industries. Throughout fiscal 2024, we work collaboratively with many leading players across our end markets to advance our product offerings and develop new solutions. By working alongside our customers and remaining focused on accelerating their operational excellence, we continue to be a key strategic partner, helping them to meet their efficiency and sustainability goals while navigating a dynamic macro environment. Third and final, we remain committed to driving increased efficiency and productivity across organization. With this focus, we have delivered lower expenses in the second half of fiscal 2024 relative to the first half of fiscal 2024. Looking ahead, we're confident in our ability to maintain expenses at current levels. We'll also continue to invest in strategic growth areas, including our DGM business. Turning to Slide 4. I will now provide an update on our suite performances in Q4 and fiscal 2024. Please note that all ACV growth figures referenced for suites will be based on our 9.4% year-over-year growth rate in fiscal 2024, which does not reflect the impact of the write-off related to the suspension of commercial activities in Russia. The digital grid management suite, or DGM, grew by approximately 40% in fiscal 2024 to contribute 2.5 points of growth in line with our expectation. This outcome is a testament to the strength of our DGM suite and products and the early benefits from building out DGM's go-to-market capabilities to date. It also underscores how we remain well positioned to be a prime beneficiary of the substantial CapEx tailwinds to modernize, expand and cybersecure grids around the world. Our outages, such as those recently experienced by the city of Houston, due to Hurricane Beryl highlight the need to create a more resilient grid in the face of more frequent and impactful weather events, including the capability to recover faster from them. These are the use cases that are recently launched AspenTech OSI outage management system was developed for and is now being deployed by utilities in North America. We also saw good momentum with utilities outside of North America as part of our Q4 success. In Europe, we signed our largest term software deal ever for the region to upgrade national grid operators existing SCADA and EMS solution while displacing a competitor. This utility was in the market for a solution that is modern, adaptable and most importantly, capable of helping them to ensure reliable real-time operations in the face of rapid renewables growth. In South America, we completed a significant term license deal with a long-standing customer that is also one of the region's largest transmission utility. With networks across multiple countries that continue to grow in complexity, this customer highly values our grid management capabilities and trusts our ability to help them navigate an evolving landscape after more than a decade of working together. These are just a few of the successes we saw with DGM in international markets in Q4. As a core driver of this suites growth, we're excited to build upon our successes globally going forward. The Subsurface Science and Engineering suite, or SSE, contributed 1 point of growth in fiscal 2024, in line with our expectations. SSE had a strong Q4 as it benefited from solid execution as well as customers' positive reception to the tokenization of our SSE products. We continue to see solid demand across the upstream market. During the quarter, for example, we further expanded our business with a national oil company in Asia for our advanced petrophysical analysis capabilities, in areas such as formation evaluation and reservoir characterization while also converting them from their prepared to a licensing arrangement to term software and tokens. This customer now has access to the full set of product capabilities in the SSE suite, which we expect will lead to use of other products, resulting in increased usage and spend with AspenTech. Turning to Slide 5. Our Heritage AspenTech suites contributed 6 points of growth in fiscal 2024, outperforming our expectations for 5.5 points of growth. The engineering suite represented 3.4 points of this total growth. Consistent with SSE, customer interest in our offerings remain solid in the upstream market. For example, we continue to expand our relationship with an upstream gas producer in Latin America that is leveraging our engineering suite capabilities to increase production from their gas fields by debottlenecking and optimizing their gas processing facilities. This equates to hundreds of millions of dollars in CapEx savings resulting in one of the most important ongoing value-creation use cases in our customer base. EPCs in particular, are benefiting from growing backlogs driven by CapEx strength in traditional energy and sustainability. In Q4, for example, we won a large 7-figure deal with a long-standing EPC customer. By expanding access to the engineering suite, this customer can now further optimize our engineering man-hour costs, streamline their facilities design processes and provide their customers with even more highly relevant asset design options, thereby improving their overall bidding prospects success. We also signed important sustainability related wins in Q4, even as growth in this area moderated relative to the first half of the year. As an example, we expanded our business with a leading sustainable aviation fuel company that is using our engineering suite to meet its operational performance objectives while scaling up. We're excited about the opportunity to continue partnering with this company going forward as it continues to grow and explore additional AspenTech offerings. The Manufacturing & Supply Chain suite, or MSC, contributed the other 2.6 points of HAT growth in fiscal 2024. Customers continue to see our MSC suite capabilities as essential to improving operational and financial performance and achieving their sustainability goals. As a result, we saw solid uptake across MSC in the second half of fiscal 2024 and especially in Q4, despite this suite experiencing the most pronounced impact from the extended downturn in chemicals. In Q4, we won several deals for our new Aspen Unified Planning and Scheduling Solution and leading multiunit optimization product, GDOT. For example, we signed a mid-7-figure deal with a leading refiner in North America based on the strength of our technology, domain expertise and dedication to co-innovation to support them in increasing operational efficiencies and creating a standardization and real-time visibility across their value chain in their next phase of their digitalization journey. We also signed a large deal with a leading refiner in Europe. This represents a continuation of a deeply collaborative relationship with the customer, who is now in the process of transforming their business from traditional refining to biofuels. Our ability to support biocomponent optimization through Unified was a key driver of our further expansion with this customer. Finally, the Asset Performance Management suite, or APM, performed as expected, remaining flat year-over-year. As I mentioned last quarter, we have simplified APM's go-to-market strategy and are increasing our focus on certain market segments where the use cases lead to significant value capture for customers and produce high-quality ACV for AspenTech. As a validation of our strategy calibration, we saw meaningful ACV growth contribution from these market segments in the Q4 quarter, which mitigated the attrition experienced from customers in market where we no longer focus on. We're in the early stages of our new strategy and plan for some moderate sales head count investment focused on APM sales in the market segments targeted going forward. On Slide 6, I would now like to provide an update on our innovation. As I highlighted on our last call, we held a successful OPTIMIZE user conference in early May. With a robust turnout, OPTIMIZE 24 was an excellent forum to reconnect with our users, align on shared visions of the future and drive further collaboration and co-innovation opportunities. We were excited to have received lots of positive feedback from customers about the event, our strategy and the Aspen technician leading to additional engagement opportunities in the quarter and adding to our existing pipeline of business. After OPTIMIZE, we continue to engage with customers around industrial AI which is how we refer to our unique plan of artificial intelligence, domain expertise and first principles based innovation. With a well-established track record in the field, we're seeing an acceleration of the interest from customers around our ability to deliver tangible value through our approach. This includes better modeling and optimization, decision support, predictive maintenance and more. As we drive further innovation around industrial AI, we believe that it will continue to serve as an important contributor to our growth. Finally, I'm also excited to announce that we plan to release our new microgrid solution under general availability this quarter as part of our V14.4 update. While this solution is part of the DGM suite, we see a significant opportunity to expand it into downstream chemicals and refining markets, where there's increasing focus on ensuring resilient and reliable power supply as renewable energy is incorporated into their electrical networks. Turning to Slide 7. I would now like to close with guidance. We started this year with a solid pipeline of business and a strong foundation from the integration and transformation work over the past 2 years. With this phase of work now largely completed, our teams will be able to focus on capturing the opportunity in front of us. For fiscal 2025, we're targeting ACV growth of approximately 9%. This is based on a total ACV balance of $933 million as of the end of fiscal 2024, which reflects the removal of all Russia ACV. At the suite level, this includes expectations for approximately 5.5 points of growth from HAT, approximately 2.5 points of growth from DGM and approximately 1 point of growth from SSE. We also expect attrition to be approximately 4.5% in fiscal 2025, which improved on our ex Russia attrition rate of 4.7% in fiscal 2024. This guidance reflects the following macro assumptions. First, we expect end market demand trends to remain largely similar to what we saw in the second half of fiscal 2024. This includes continued strength with utilities and energy, muted growth in chemicals and a more moderate sustainability CapEx environment. Second, we expect the macro environment in fiscal 2025 to remain dynamic. This includes expectations for the continuation of cautious customer spending in the face of an uncertain economic environment. For free cash flow, we expect approximately $340 million in fiscal 2025. I would note that we expect underlying free cash flow growth in fiscal 2025 to be meaningfully stronger than our guidance indicates due to several one-time factors that Dave will address in a moment. Finally, we aim to deliver flat expenses year-over-year. As I touched on at the beginning, we established solid traction in this area in the second half of fiscal 2024. And this fiscal 2025 expense plan further emphasizes our commitment to leading a best-in-class profitability business. As part of these efforts, we have identified additional opportunities to further streamline the organization and align resources across AspenTech. Today, we announced a workforce reduction of approximately 5% in the first quarter of fiscal 2025, including actions related to our Russia exit. We are supporting the departing employees with appropriate severance packages and other services to help them in their transition to new opportunities. These type of decisions are never easy to make, and on behalf of the company, I want to thank all impacted employees for their service and contributions to AspenTech over the years. With that, I will turn it over to Dave for a review of our financial results. Dave? Dave Baker Thank you, Antonio, and hello, everyone. It is a pleasure to join my first call with AspenTech. I'd like to start by thanking Chris Stagno for his excellent work in serving as the interim CFO role and working with the team to deliver a strong finish to our fiscal 2024. I'm excited to join such a talented team and to partner with Antonio, Chris, our finance leaders and the broader executive team to continue to drive value and focused execution for AspenTech. I look forward to speaking with many of you in the days ahead. Turning to Slide 8 to review our Q4 and fiscal 2024 results. We grew ACV 9.4% year-over-year in fiscal 2024 and 3.5% quarter-over-quarter in Q4. This outcome was 40 basis points above our guidance for fiscal 2024, as we benefited from strong execution on a solid pipeline of business to close out the year. Total bookings were $416 million in Q4 and $1.16 billion in fiscal 2024 while revenue was $343 million in Q4 and $1.13 billion in fiscal 2024. Please note that our revenue is recognized under ASC Topic 606 and bookings and revenue are heavily impacted by contract renewal timing. Also, under our ASC Topic 606, the impact of additional sanctions on Russia resulted in a modification of all existing contracts with customers in the country for a net reduction of $5.5 million in Q4 revenue. For profitability, on a non-GAAP basis, we reported operating income of $173 million in Q4, representing a 50.6% non-GAAP operating margin. For fiscal 2024, we reported non-GAAP operating income of $456 million, representing a non-GAAP operating margin of 40.5%. As Antonio noted, we saw strong traction on cost savings in the second half of our fiscal 2024, following more elevated expense outlays in the first half of fiscal 2024 to fuel our long-term growth. Net GAAP net income was $151 million in the quarter or $2.37 per share, compared to $138 million or $2.13 per share a year ago. Non-GAAP income was $422 million or $6.59 per share in fiscal 2024. Turning to our balance sheet. We ended fiscal 2024 with approximately $237 million of cash and cash equivalents and no debt. As of quarter end, we had approximately $23 million of cash in Russia that we are unable to transfer to other countries due to sanctions and their impact on banking in the country. We plan to use roughly half of this amount as we wind down our Russia operations in fiscal 2025, mostly in Q1, with the remainder staying on our balance sheet as restricted cash in noncurrent assets. We also enter into - we also entered into a new 5-year $200 million credit facility in Q4. On share repurchases, we completed our $300 million share repurchase authorization in Q4, repurchasing an additional 278,000 shares for $57 million. We also announced today that our Board of Directors has approved a share repurchase authorization for up to $100 million in fiscal 2025. We believe this is a prudent authorization amount that provides us flexibility to pursue M&A opportunities, which remains our top capital allocation priority while also returning capital to shareholders. On cash flows, we generated $155 million of cash flow from operations and $153 million of free cash flow in Q4. For the full year, we generated $340 million of cash flow from operations and $335 million of free cash flow, slightly below our expectations due to higher cash tax. Turning to Slide 9. I would like to now close with guidance. Consistent with prior fiscal years, we will continue to provide guidance on an annual basis. For fiscal 2025, we expect total ACV growth of approximately 9% year-over-year, from our base of $933 million as of the end of fiscal 2024. This includes expectations for attrition of approximately 4.5% and market conditions that are largely similar to what we experienced in the second half of fiscal 2024, as Antonio mentioned. We expect that total bookings of $1.17 billion, revenue of approximately $1.19 billion, GAAP net income of approximately $52 million and non-GAAP net income of approximately $478 million. From a cash flow perspective, we expect operating cash flows of approximately $357 million and free cash flow of approximately $340 million. This includes expectations for cash tax payments of $135 million and higher capital expenditures related to office buildouts. Turning to Slide 10. We have included a chart to help bridge our free cash flow guidance for investors. This includes two important considerations. First, we estimate that Russia free cash flow represented approximately $25 million in fiscal 2024. Second, we expect to use an additional $10 million in cash related to our Russia exit as well as $8 million in cash related to our restructuring charge. Adjusting for these one-time items, we expect to grow underlying free cash flow by 15% in fiscal 2025. For a complete review of our updated fiscal year '25 guidance, please refer to our earnings presentation slides now available on our IR website. Turning to Slide 11, I will now address our linearity expectations for the year. First, for ACV, we expect the cadence of new ACV to be similar to what we have seen historically. We also expect our Q1 sequential growth rate to be softer than we have seen in the past due to higher-than-normal concentration of attrition in the quarter. Second, the workforce reduction Antonio referenced earlier will impact our financials in the following ways. First, we expect to realize approximately $25 million in annualized cost savings from this action. This is aligned with our goal to keep costs flat, while also investing in strategic growth areas. Second, we expect the restructuring charge to be between $7 million to $9 million and for the majority of this charge to occur in the first quarter of fiscal 2025. On free cash flow, we expect to generate the substantial majority of our free cash flow in the second half of our fiscal year, consistent with our historical results. We also expect free cash flow to be near breakeven in the first quarter, which is consistent with our historical results and also due to the timing of one-off items related to our restructuring in Russia exit. Finally, we expect bookings of $681 million up for renewal in fiscal 2025, with $85 million up for renewal in Q1. In closing, we delivered a strong Q4 to finish our fiscal year. Look forward to fiscal - looking to fiscal 2025, we remain focused on driving further productivity and efficiency across the organization in-line with our targets for solid topline ACV growth and profitability improvements. Additionally, with a strong foundation in place for our expanded portfolio, we are confident in our ability to deliver value for customers while also navigating the current dynamic macro environment. With that, I will turn the call back to Antonio for his closing remarks. Antonio? Antonio Pietri Thanks, Dave. Before we open it up to Q&A, I would like to announce that we will be holding an Investor Day on Tuesday, September 17, near our headquarters in Boston, Massachusetts. With 2 full years since our strategic transaction with Emerson and experience in operating our expanded portfolio, we're excited to come together for a more comprehensive discussion of what we have accomplished, as well as how we're positioned for long-term growth. For those interested in attending, please reach out to our Investor Relations team for additional information. We will also webcast the event live for those who are unable to make the trip. With that, we will open it up to questions. Operator? [Operator Instructions] Now first question coming from the line of Rob Oliver with Baird. Your line is open. Great. Hi, good afternoon. Hi, Antonio. Hi, Dave. I had two questions. Antonio, one for you and then one for Dave. So Antonio, I wanted to ask about some of the sales issues from last quarter, which you had cited that there were some sort of sales execution issues, I think largely pertaining to the Heritage AspenTech business, but correct me if I'm wrong there. I just wanted to get an update from you now heading into the new fiscal year where you guys stand relative to the kind of sales, sales leadership and your confidence in the ability to drive that organization? And then I had a follow-up. Thanks. Antonio Pietri Yes. Well, let me look, I'm very confident [Technical Difficulty] address all the execution issues that we saw in Q3. And moving forward is about executing with excellence. We quickly did an analysis after the end of Q3 to understand where we had some of the challenges. Of course, there was a much deeper review of deals and strategies to close those deals. And the results that we achieved in the quarter are a demonstration of what's possible here. Rob Oliver Great. Thanks, Antonio, I appreciate that. And then, Dave, if you'll allow me, just a 2-parter for you. One on - I know you mentioned the attrition will be slightly higher in Q1 when you walked us through the linearity. Why is that? And the attrition is coming down for the year and what gives you the confidence that you can achieve that? And then the second is just more of an open question, on yes, you've been in your seat now for a quarter and wanted to get a sense from you of kind of where you see - you mentioned in your prepared remarks about value creation, and I would just love to hear where you - what gets you most excited now that you have a sense of the organization? Thank you very much. Dave Baker Sure, Rob. So the attrition question first with Q1, it really is just the timing of the renewals and when they land in the year and this year, there are more renewals land in Q1. And we are confident that we will see the attrition coming down just one with the exit from Russia, that helps. And then secondly, just based on the renewals that we have and we could scope out. We have good line of sight there and are confident in being able to deliver that. And then secondly, the first couple of months, it's been a lot of learning and working on partnering with Antonio, the executive team as well as finance to really understand. And as you look at going forward, it really is continued focus on the execution that we saw in Q4 and there's still work for us to do around bringing some of the back-office systems together, as well as some of the footprint consolidations and then just generally working with the team as we look at our operations and how we can continue to drive efficiency there across the entire organization. Thank you. And our next question coming from the line Andrew Obin with Bank of America. Your line is open. David Ridley-Lane Hi, this is David Ridley-Lane on for Andrew. Look, I think ACV growth rate ex Russia seems to have kind of bottomed you or stabilized with both third quarter and fourth quarter, up 10% year-over-year. I guess with easier comparisons ahead, what factors are you kind of seeing or baking into guidance to have that slowing ACV growth for fiscal '25? Antonio Pietri Yes. Well, let me look, as we said in our prepared remarks, certainly, we still believe that there's an uncertain macro environment out in the marketplace. But equally, we're more cautious on the demand that we would expect to see from sustainability CapEx. We had a strong first half of the year in fiscal '24. We had a slower benefit from sustainability CapEx in the second half of fiscal '24. I think we - our assumption is that we'll continue to see that sort of environment in the second half of fiscal '24 into fiscal '25. Therefore, there's sort of a half year impact there. And considering some of the reports that we've seen and uncertainty around demand, I think we're being more cautious around the refining demand. We saw very strong demand from refining in the second half of fiscal '24. We've seen reports of compressed margins in refining. But overall, it's just a slightly lower expectation around refining demand. But overall, look, where we sit today, we feel very good about that 9%, and we'll certainly execute throughout the year to exceed that number. David Ridley-Lane Got it. And then just touching on the commercial relationship with Emerson. As you went through the year, did the kind of ACV contribution that you've got through that channel improve? And how are you thinking about that within the fiscal '25 guidance? Thank you. Antonio Pietri Yes. Look, certainly, now that we've closed out fiscal '24, we can see that some of the adjustments that we made on our joint go-to-market activities at the beginning of fiscal '24 started to pay off, especially in the second half of the fiscal year. And now even here into Q1 fiscal '25, we see some solid opportunities that are resulting from our joint go-to-market activities, and we would expect to see a greater benefit from, really, what is a developing comfort between the two companies on how we need to be operating in the marketplace, the strengths of each other, and how we can leverage each other's capabilities and technology to create a 1 plus 1 equaling 3. Thank you. And our next question coming from the line of Dylan Becker with William Blair. Your line is open. Dylan Becker Hi, Antonio. Hi, Dave. Thanks for taking the question. Nice job. Maybe first for Antonio, you called out a customer realizing $100 million plus in CapEx savings, pretty significant, obviously, ROI here. I wonder despite kind of a challenging macro backdrop you're seeing, how those customers are pairing the potential savings around some of their decisioning efforts, particularly if large kind of capital projects maybe are a bit more challenged to kick off throughout fiscal '25? Antonio Pietri Well, let me look, this is the beauty of our technology in that - the use case that I referenced and it's hundreds of millions. I won't give you the specific number because it's actually these customers did present at OPTIMIZE, and I know you were there, Dylan, and he presented this specific use case. In the face of challenge CapEx, this customer is using our technology to find ways to debottleneck their existing gas processing facilities and optimize them for throughput. And therefore, they are generating incremental throughput through those facilities that saves them building a new facility that would cost them in the hundreds of millions of dollars. And that's how that use case comes about. So look, there's different ways that our customers innovate and use our software to create value. And I think this is a great example of what's possible with our technology. Dylan Becker Okay. That's great. That's helpful. Thanks, Antonio. And maybe somewhat for Dave, but maybe Antonio, you've been here for a while too, calling for the significant kind of operating leverage growth on the back of some flat expenses. You've done this in the past, right? So how should we think about kind of where that leverage is coming from? Sales efficiencies, synergies? And maybe how to think about the potential balance here between that margin leverage and the ability, as you guys kind of called out to optionally reinvest or use that as an optionality lever, if you will, in the potential situation where the environment does improve throughout the balance of the year? Thanks. Antonio Pietri Yes. Well, let me first speak to look to my experience and Dave can chime in. Look, I've always believed, and we know that one of the great strength of AspenTech is the leverage that we have in the model to increase sales with very little incremental spend as long as we're driving innovation into the market. So we continue to see that, and I would argue - I mean, Q4 had a big component of that. If you look at the DGM outcome that we achieved in the fiscal year and in Q4, a lot of the incremental ACV, the growth in ACV came from aftermarket sales to customers were - that already had an installed SCADA system from DGM the monarch system and an EMS solution, so the ability to expand sales with those customers. So ultimately, I think our relationship with customers, innovation and the token licensing model in that any innovation or new products that we develop or acquire and we can put into the suite and immediately it's available to every customer of AspenTech, create a highly leverageable go-to-market model. And that's the basis for our belief that we can run a best-in-class profitability business here, over time, as we scale the DGM, SSE and we continue to grow the AspenTech business. Thank you. [Operator Instructions] Our next question coming from the line of Devin Au with KeyBanc Capital Markets. Your line is open. Jason Celino Hey, thanks. This is actually Jason. I was able to make it. Maybe a couple of clarifying questions. So if we look at the growth in Q4, Russia - with Russia and without Russia, it looks like Russia is a tailwind - excluding the tailwind, is that just because Russia just wasn't growing and kind of a drag? Antonio Pietri Yes. As we said, I mean, in fiscal - we said in the remarks, in fiscal '23, it was clear that Russia wasn't going to be a contributor to growth based on the outcome that we achieved. And the fact is more or less the same outcome was experienced in fiscal '24. The benefit to the growth rate is when you take out the ACV that existed in Russia, then your denominator becomes smaller and therefore, your numerator produces a larger number, which is a faster or greater growth rate. That's the benefit of that. Jason Celino Okay, got it. Basic math. Yes. And then the restructuring, is that only impacting maybe your employees in Russia or is that restructuring other areas, just wanted to clarify? Antonio Pietri No, no, this is broad-based across the company. The fact is that the Russia component is small. This is across every function and region. Thank you. And our next question coming from the line of Nay Soe Naing with Berenberg. Your line is open. Nay Soe Naing Hi, thank you for giving the questions. I've got a couple if I may. Firstly, starting with the chemicals vertical, please, it will be great to get an update on the macro dynamics there. We have now hit anniversary of when you guys started - the macro cycle started affecting your numbers. So it would be great to understand or if you feel like the balance cycle is now ahead of trough there going forward? And then secondly, this is now a few quarters that you're able to call out competitive wins in DGM. So it would be great to hear from you how you are able to achieve these competitive wins in this product market? That will be great. Thank you. Antonio Pietri Okay. Alright. Well, let me first address the first question. Look, the chemicals market continues to be, from an OpEx standpoint, continues to be depressed going through the trough. We have seen a couple of positive announcements from chemical companies where they're starting to see a pickup in demand, but a very preliminary. And doesn't - and in our opinion, doesn't change the trajectory of what we expect to see in fiscal '25, which is more of the same that we saw in fiscal '24. So our assumption for the fiscal year is that we will see little contribution from chemicals. And I just want to point out, I mean, chemicals is about 22% of our total ACV, which means that in a normal year, we would probably see about 20% of our growth coming from chemicals. So there's a significant component of our growth that is not producing - of our business that is not producing. And when it starts to pick up, we would expect to see that benefit in a meaningful manner to our overall growth rate. When it comes to DGM, look, in a way, the OSI business prior to Emerson and AspenTech, even though it was a 30-year-old business, it was a new kid on the block, and they developed a very contemporaneous technology with great capabilities, modern technology, a great cybersecurity, that when it's compared to the technology of the incumbents, it certainly outshines them from a capabilities, deployability, configurability, ease of use and so on and so forth. I have been in many controlled rooms of our customers in DGM over the last 18, 24 months. And you can see how happy these customers are with the dashboard and the user interfaces and everything that they use around DGM. So basically, it's just more contemporaneous technology, more modern, more cybersecure, more applications on top of the base data system. In my remarks, I referenced outage management, which is a new application that is becoming incredibly important for utilities in order to be able to pinpoint outages and recover from them faster. There is also capabilities around distributed energy resources, especially the use case around energy battery storage or renewable energy. So it's a combination of factors. And I just want to point out that when these utilities go out for - to upgrade their systems, they're either upgrading their system with the incumbent or they are choosing someone else that, therefore, results in a displacement and it is in those situations, where an OSI is chosen that we displaced because we are building our business, we are building our installed base and that will take many more years to accomplish, but it is the opportunity that we have ahead of us here. [Operator Instructions] And our next question coming from the line of Joshua Tilton with Wolfe Research. Your line is open. Arsenije Matovic Hi. This is Arsenije on for Josh. So, I just wanted to understand the 4Q bookings coming ahead, I think of expectations. What drove that? And then on the flat bookings guidance for 2025 on a reported basis, not adjusting for Russia in '24 bookings and your renewal bookings $100 million higher than '24, does the guidance embed any conservatism in new bookings in addition to reflecting the impact of discontinuing Russia operations, and just a quick follow-up? Antonio Pietri Yes. Well, let me - no doubt that the guidance for fiscal '25 assumes the discontinuation of Russian operations and the write-off of the ACV, which also means we are writing off equivalent amount of bookings associated with that ACV. So, you have to adjust for that. I also want to remind you that our - the profile, our bookings year-to-year is not consistent. It's a mountain range. And this year, we have coming up, we have the bookings that we have. We have a concentration of bookings in Q1. But the important thing to note is that just because we have a certain amount of bookings doesn't mean necessarily that those bookings generate an equal and proportional amount of growth in ACV. In the bookings, there is a combination of attrition. There is a combination of flat renewals and there is a combination of growth from some of those bookings. And depending on the contracts that are coming up for renewal is we produce a certain outcome from the bookings that are coming up from renewal. And then we have to go generate incremental growth from the existing contracts that are not coming up for renewal. And the fact is that most of the growth that we experienced in any given year is from contracts that are in the middle of the contract as opposed to coming up for renewal. I don't know if that answered your question. Arsenije Matovic That said on the forward bookings estimate. But just in terms of 4Q bookings, I think it was above expectations, unless I misunderstood something from the presentations. Why don't you clarify that, what drove that outperformance? Antonio Pietri The Q4 outperformance, let me look. So, this is a thing about giving you all the bookings number, whether it's in a quarter or for the year. The fact of the matter is that we can also do early renewals of contracts that are in the future. And there was a contract that wasn't supposed to renew until this fiscal year, fiscal year '25 that was accelerated into Q4 as part of a bigger transaction for growth that was signed in the Q4 quarter. So, there was a repackaged incremental growth with an early renewal of a large contract, which then generated a larger amount of bookings that were not expected in the initial number that we gave you. Thank you. And as there are no further questions in the Q&A queue, at this time, I will now turn the call back over to Mr. Antonio Pietri for any closing remarks. Antonio Pietri Thank you, operator, and thank you to everyone for joining the call today. We will be attending the Piper Sandler Growth Conference in the second week of September. As I mentioned earlier, we will also be holding an Investor Day on September 17th, please reach out to our Investor Relations team for more information on this event. And we look forward to catching up with many of you soon. Thank you everyone for joining and we will see you on the road. Thanks. That does conclude our conference for today. Thank you for your participation and you may now disconnect.