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Good day, and thank you for standing by. Welcome to the Fiscal First Quarter 2023 AspenTech call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Denyeau of ICR. You are now able to talk.
Thank you, Justin. Good afternoon, everyone, and thank you for joining us to discuss our financial results for the first quarter of fiscal 2023, ending September 30, 2022. With me on the call today are Antonio Pietri, AspenTech's President and CEO; and Chantelle Breithaupt, Aspen Tech's CFO.
Before we begin, I will make the safe harbor statement that during the course of this call, we may make projections or other forward-looking statements about the financial performance of the company that may involve risks and uncertainties.
The company's actual results may differ materially from such projections or statements. Factors that might cause such differences include, but are not limited to, those discussed in today's call as well as those contained in our most recently filed Form 10-K with the SEC. Also, please note that the following information relates to our current business conditions and our outlook as of today, October 26, 2022.
Consistent with our prior practice, we expressly disclaim any obligation to update this information. Please also note that we have posted a financial update presentation on the [indiscernible] slide. The structure of today's call will be as follows: Antonio will discuss business highlights from the first quarter and fiscal year, and then Chantelle will review our financial results and discuss our guidance for fiscal year 2023.
With that, I'll turn to Antonio. Antonio?
Thanks Brian, and thanks to all of you for joining us today. Our first fiscal quarter performance was in line with our expectations. This was the first quarter since the completion of the Emerson transaction. [Technical Difficulty] We entered the fiscal year with a clear focus to execute on our integration plan after the 7.5 months of [indiscernible] completed before the close of the transaction on May 16.
During the quarter, we validated many of our expectations from the integration planning phase, but also learned the additional process improvements and potential synergies. We also put new processes and systems in place to support the transformation efforts that will deliver the significant growth and profitability expectations we have for the business in the coming quarters and years.
Some of these include successfully validating the token licensing model and designing the suite for SSE, which was released last week for Windows. The strong release time line was achieved through the focused effort by our software development and product management teams. The SSE suite has quickly been embraced by customers that we have engaged with in these discussions.
This is the first step in the transformation of the SSE business and a clear demonstration of the learnings and expertise gains from our own transformation in the 2009 to 2014 period. As we have experienced, when heritage AspenTech introduced the token licensing model for the engineering and MSE suites, customers quickly recognized that by providing the entire portfolio of products in a single suite, it is much easier to try new products and accelerate adoption under a token licensing model.
We expect the latest version of the AspenONE SSE suite to be released in the near future as the final component of the tokenization of the SSE product portfolio; second, we began the process of migrating the DGM or digital grid management product portfolio to a term contract structure with the ultimate objective being the introduction of the token licensing model and DGM Suite, which is expected to happen in the second half of this fiscal year.
As a reminder, the DGM product portfolio has been historically a perpetual license business. So there is a significant transition for existing customers that needs to occur to get them onto the token licensing model while we will live with the suite and tokens when engaging new customers.
The introduction of the DGM suite will also enable the cross-selling opportunity of DGM products into heritage AspenTech market where customers are accustomed to this licensing model; third, we have signed and been awarded multiple commercial agreements for DGM products that will be implemented solely by third parties to demonstrate separability of software licenses and services.
Achieving separability will result in an earlier inclusion of software licenses to ACV. Today, software licenses in the DGM business are recognized on a percent of completion basis during projects since these are considered bundled. Therefore, DGM transactions are currently not included in ACV when signed. We aim to achieve this separability within the second half of fiscal year 2023; fourth, we have successfully onboarded and aligned the sales teams from OSI and SSE, including establishing a common sales and forecast methodology, refining territories and accounts ownership, standardizing quota and commission structure and establishing cross-sell procedures. Ensuring alignment across the sales organization and the entire company is critical, and we're pleased with how we have come together throughout the first quarter.
And last, we have established a commercial organization that will support Emerson's go-to-market teams in the various other territories identified for them to resell our products. Emerson has also established [indiscernible] with AspenTech product quarters that will be compensated for Siemens. Overall, we cannot be more pleased with the progress made in the partnership.
In regards to the synergies expected from the transaction, we expect to deliver synergies in 4 areas: growth, business transformation, costs and commercial agreements. Each of the synergy streams are now broken down into substreams with clear team and individual accountability for each. Overall, we are pleased with the progress made in the first quarter in each substream to put us on the trajectory to meet or exceed it.
We have made great progress on the cost synergies already capturing a significant percentage of them. We expect to begin generating synergies in the 3 other areas in the second half of this fiscal year. We've been confident about our ability to deliver on the synergies. And as mentioned before, we have also identified other potential areas of opportunities.
I'm very proud of the performance of the team in the first quarter. We successfully laid the foundation to set us in the right trajectory to achieve our fiscal year 2023 and longer-term objectives. Now turning to our first quarter financial results. Annual contract value or ACV was $809.6 million, up 7.7% year-over-year. Revenue was $250.8 million. GAAP loss per share was $0.17, and non-GAAP EPS was $2.20 and free cash flow was $10.7 million.
Additionally, we're sharing the following information to provide you with visibility into the early transformation momentum created with the DGM and SSE product portfolios in the quarter. The DGM product portfolio generated $16.9 million in software license orders not accounted for ACV results, $5.5 million, of which were term agreements and the [indiscernible]. While the term licenses cannot be included in ACV when signed due to the bundled arrangement nature of the transaction, this outcome demonstrates our ability to introduce term licensing to OSI customers. We're very happy with this outcome right out of the gate, considering that it was the first full quarter since the transaction closed.
For the SSE product portfolio, we saw the start of the transformation of the commercial relationship with customers. Some customers with agreements up for renewal accept the new terms of conditions typical of heritage AspenTech software agreements converted [indiscernible] term license agreements and/or, in some cases, extended the term of their agreements. An example of the change in the commercial relationship with customers is the agreement with an international oil company based in the Asia Pacific region that consolidated a legacy perpetual license agreement and multiple older contracts into one contract at a time of renewal of one of their existing agreements, signing up for a 3-year term with significant growth, all due to the newly perceived value in the relationship with AspenTech.
Again, this is an early demonstration of the value creation opportunities we have with these new businesses and the changes we're making in how we will approach customer relationships. Now moving on to the macro environment. Overall, demand trends were similar to what we have seen in recent quarters. While we remain vigilant about the uncertain economic backdrop, fundamentals in each of our core end markets remains constructive. We continue to see strong deal activity across each of our key end markets and in each region around the world.
Our customers recognize that the dual challenge of meeting the rising demand for resources globally with the urgent need to meaningfully reduce environmental impact will be the key strategic priority facing their businesses for many years to come. Failing to meet this objective will result in an increasingly difficult regulatory environment that may eventually challenge their license to operate from society at large, meaning the dual challenge will require rethinking how our customers design and operate their assets, including their reliance on electrical power from renewables.
This in turn will drive a significant investment in technologies to modernize the electrical grid, capture and sequester carbon in industrial parts and scale new energy sources, such as hydrogen, which we believe will all ultimately benefit AspenTech's business in meaningful ways and make us an increasingly strategic partner to them. As we have also seen in recent months, energy security has become a critically important new strategic concern. It is spurring substantial new demand in areas like LNG and more broadly reinforces the fact that many of the traditional sources of energy will remain essential to securing a steady and secure flow of affordable energy for the foreseeable future.
The breadth and depth of AspenTech's product portfolio and our decades of experience in this market, also puts us in a unique position to benefit from these trends. I would now like to provide some more color on our performance by vertical. Refining had a solid start to the year. Demand for refined products remains strong and refiners settled into a more normalized profitability profile in the quarter following the record crack spreads earlier this year.
Increase in diesel and jet fuel demand is expected to continue to climb over the next 12 months, providing greater support for improved financial [indiscernible]. Refining has long been a source of strength for AspenTech, and we believe this industry segment will continue to be well positioned in the remainder of fiscal year 2023.
The upstream vertical is now a more meaningful contributor to AspenTech and had a strong quarter as we saw exciting initial demand for our SSE products. Customer feedback has been fantastic on the value of bringing together AspenTech's engineering solutions with SSE's capabilities in areas like subsurface modeling and carbon capture. Having a product portfolio that supports the entire life cycle of upstream operations is unprecedented and solidifies our leadership in this market.
We believe there is significant upside potential in the coming years in the upstream market for the SSE suite as oil and gas companies increased CapEx budgets after several years of underinvestment and the opportunities from the version sequestration for CCS and geothermal energy become more prevalent. We also get off to a great start in the power transmission and distribution market or T&D, generating new momentum with DGM after the 2-year ownership position process for the OSI business.
The scale of investment immediately decree in the coming years to support increased electricity demand and the complexity introduced by renewable sources of power, like green, solar and hydro at large. We signed a number of important wins in DGM during the quarter, including the first multimillion dollar term license order in that business. We are very pleased with how the pipeline for this business is building and the breadth of customer conversations we're having. We [indiscernible] recognize that they will need much more sophisticated technology across their operations to manage the growing complexity of power transmission and distribution.
And while it is early, we are having exciting conversations with some of our energy and clinical customers about the potential benefits of micro grids to their business. This opportunity will take time to play out, and we believe it will be significant. Chemicals had a good quarter, and we have been very pleased with how customers in this market have embraced the need to increase investments to meet the dual challenge, which for them, also includes plastics circular.
In the near term, this market, particularly in Europe, will need to work through the challenges related to the energy supply disruptions from a cost and demand perspective. This is a situation that we're monitoring closely and is probably the biggest area of uncertainty in our business currently. However, in the past, we have also seen that these types of situations have benefited AspenTech as it becomes an even bigger imperative to run a petrochemical plant as efficiently as possible. Finally, we're pleased with the trends in the E&C vertical. As we have discussed in recent calls, the need for sustainability is opening up new business opportunities for E&C, which is helping to strengthen and diversify their business. For example, in 2021, over 100 CCS or carbon capture and sequestration facilities were announced.
Traditional oil and gas CapEx investment is also growing meaningfully after several years of underinvestment during the pandemic. The net result of all of this is a vertical that leaves us well positioned as it has been in years to generate consistent growth for AspenTech. The macro environment referenced above, supported the performance of the heritage AspenTech suite in line with our expectations. As a reference, following our [indiscernible] agreements signed in the quarter.
First, one of the largest public companies in the United States and a decade-long customer of OSI committed to the implementation of 2 large [indiscernible] systems for advanced distribution management or ADM and distributed energy management or DEM capability. We were selected following a highly competitive sales process in which they evaluated technologies from multiple competitors. This win expanded deployment of DGM solutions to its distribution and outage management business from its existing deployment in its transmission business. This expanded agreement is an important step forward in the customers' efforts to invest in its regulated businesses, accelerate its carbon reduction targets and streamline the [indiscernible] value for customers, communities and investors.
I would note that we were able to successfully transition the sales process to a business contract after starting as a [indiscernible] prior to the completion of the Emerson transaction; second, a state-owned oil company in one of the major oil-producing countries in the Eurasia region, signed a new 5-year agreement using AspenTech's customary return for a range of products in the SSE portfolio.
[indiscernible] as this has been a former SSE customer whose contract expired long ago and decided to return in part due to the broader product portfolio and vision of the new AspenTech. This new agreement will strengthen the relationship for further expansion in the use of SSE products. And third and final, an international company and long-time AspenTech engineering suite customers expanded its total spend commitment for the third time since the renewal of the agreement in fiscal 2021 and has now increased its total spend by more than 40% in 2 years. This amendment increases software access to their gas business for use of the integrated front-end engineering design capabilities, including the Aspen OptiPlant product. There are many more initiatives being pursued with this customer for further expansion in the use of AspenTech products.
From an innovation perspective, we have finalized [indiscernible], which we will release for general availability soon, and where our continued investment in sustainability will be further demonstrated with many new application moments. Meeting the dual challenge will also require co-innovation and partnering by customers and suppliers of technology. We now have a dedicated team co-innovating with our customers where one of the most interesting developments in the partnership group, we have established to develop a solution to record, report and manage the potential CO2 emissions by leveraging several of our products.
This is a great indication of the increasingly important role AspenTech is playing with our customers in the sustainability space. We will also be hosting open forum, our global conference for [indiscernible] for users of the DGM product portfolio in Las Vegas in early December. This is an exciting opportunity for the new AspenTech to establish our vision and direction for the [indiscernible] and engage with this customer growth to introduce them to the capabilities of the new company. Finally, we continue to execute on our M&A strategy.
During the quarter, we acquired Inmation, a market leader in industrial real-time information management. Inmation adapts to the needs of its customers by connecting an organization's industrial data from various data sources from client-level histories to enterprise systems to create a real-time industrial data infrastructure. We will combine this capability with AspenTech's existing portfolio of plant level solutions and AI capabilities to create a unique enterprise-wide data infrastructure.
We will make Inmation the cornerstone of our AIoT industrial data and connectivity business. In addition, we continue to make progress in integration planning for Micromine and are having positive conversations on how to capitalize on the opportunity in the metals and mining market. We expect the transaction will close late in our second fiscal quarter subject to regulatory approvals. I would like to wrap up with some quick business dynamics and our outlook for fiscal year 2023. We are tracking well against our full year ACV growth target of 10.5% to 13.5%, including 4 points of contribution from DGM and SSE as well as against our free cash flow guidance. As we have indicated previously, historically, the second half of the fiscal year is much stronger for heritage AspenTech.
We expect the growth and synergies from DGM and SSE to begin materializing in earnest in the second half of the fiscal year, considering the cell cycle for the pipeline of these products and the time required to evolve the commercial relationship with [indiscernible]. We also want to reiterate that spending strength and opportunity dynamics in the first half of fiscal year remained positive, reflecting customers' calendar year 2022 budgets. As we approach the second half of the fiscal year, today, we remain optimistic that customer budgets for calendar 2023 will be supported.
Anecdotally, we've heard positive feedback from customer oil and gas CapEx projects for next year. Also, please recall that budget in the power and the market are typically regulated, so there's a good deal of visibility in that market. While our customers' businesses have continued to do well, we recognize that they faced a number of potential challenges, particularly in the chemicals market in the near term.
As a reminder, our guidance range was intentionally set wider than normal to account for a range of outcomes that also includes geopolitical considerations. We believe that was prudent back in August, and we continue to think it's the right approach.
Let me wrap up by saying how pleased I am with the progress we made in the first quarter, the hard work by everyone at new AspenTech to bring together these 3 businesses in such a short time, has been a great success. We have set the stage to deliver the growth and financial objectives we have guided to for fiscal year 2023 and beyond. With that, let me turn the call over to Chantelle. Chantelle?
Thank you, Antonio. I will now review our financial results for the first quarter of fiscal 2023. As a reminder, these results are being reported under topic cost mix, which has a material impact on both the timing and method of our revenue recognition for our term license contracts. Our license revenue is heavily impacted by the timing of bookings, and more specifically, renewal bookings. A decrease or increase in bookings between fiscal periods resulting from a change in the amount of term license contracts up for renewal is not an indicator of the health or growth of our business. The timing of renewals is not linear between quarters or fiscal years and this nonlinearity will have a significant impact on the timing of our revenue.
As a reminder, we have transitioned from annual spend to ACV annual contract value as our primary growth metrics. We define ACV as an estimate of the annual value of our portfolio of term license and term and perpetual software maintenance and support for SMS agreement. ACV provides insight into our annual growth and attention of our recurring revenue base, which is the majority of our overall revenue as well as recurring cash flow.
Annual contract value was $809.6 million in the first quarter of fiscal 2023, up 7.7% year-over-year. This includes approximately $2.7 million of contribution from the recently acquired business of Inmation. Please also note that we booked a $1.7 million reduction in ACV during this quarter due to a Russia sanction-related write-offs. As Antonio mentioned, while we work through the transition of the DGM portfolio concern licenses, orders from this business are not included in ACV when signed due to the lack of separability from the AspenTech provided services. We expect DGM to contribute more meaningfully to ACV in the second half of this fiscal year after we achieve separability.
Annual spend for heritage AspenTech, which the company defines as the annualized value of all term license and maintenance contracts at the end of the quarter for the businesses other than OSI and SSE was approximately $682.3 million at the end of the first quarter of fiscal 2023, which increased 8.3% compared to the first quarter of fiscal 2022 and 1.2% up sequentially. This includes approximately $1.6 million of contribution from Inmation.
As a reminder, we intend to provide this disclosure on annual spend for heritage AspenTech only for fiscal 2023, to provide investors comparability with our historical disclosures. Total bookings, which we define as the total value of customer term license and perpetual SMS contracts size in the current period less the value of term license and perpetual SMS contracts signed in the current period but where the initial licenses are not yet being delivered under Topic 606, plus term license and perpetual SMS contracts signed in the previous period for which the initial licenses are being delivered in the current period, was $224 million, a 43% increase year-over-year. Total revenue was [ $250 ] million for the first quarter. As a reminder, as a result of the Emerson transaction, the subsidiaries that included the DGM and SSE businesses to change the surviving entity.
As a result, the year ago comparisons you see in our financial statements only include DGM and SSE in the first quarter of fiscal 2022, and year-over-year comparisons are not meaningful. Turning to profitability, beginning on a GAAP basis. Operating expenses for the quarter were $210.9 million, total expenses, including cost of revenue, were $302 million. Operating loss was $51.2 million, and net loss for the quarter was $11.2 million or $0.17 per share.
The net loss reflects the noncash expense recognized for the mark-to-market adjustment for an Australian dollar foreign currency derivatives related to the announced Micromine acquisition. This will continue to fluctuate until the closing of the transaction.
Turning to non-GAAP results. Excluding the impact of stock-based compensation expense, amortization of intangibles associated with acquisitions and acquisition-related fees, and excluding the impact of the unrealized loss on the foreign currency derivatives, we reported non-GAAP operating income for the first quarter of $92.6 million, representing a 36.9% non-GAAP operating margin.
As a reminder, margins will fluctuate period to period due to the timing of customer renewals and therefore, license revenue recognized during the quarter. Non-GAAP net income was $142 million or $2.20 per share based on 64.5 million shares outstanding. Turning to the balance sheet and cash flow. We ended the quarter with approximate liquidity $2.5 million of cash and cash equivalents and $270 million outstanding under our credit facility. During the quarter, we spent approximately $75 million for the acquisition of Inmation.
As Antonio highlighted, we are excited to bring Inmation together with AspenTech and believe it is a great example of the opportunity we have to expand our product portfolio and increase the value of delivered customers via acquisition. From a financial perspective, Inmation is expected to be immaterial in fiscal 2023 with a revenue profitability and ACV contribution perspective. In the first quarter, we generated $5.1 million of cash from operations and $10.7 million of free cash flow after taking into consideration the net impact of capital expenditures, capitalized software and including acquisition and integration planning related payments. As a reminder, the first quarter is typically our lowest cash flow quarter due primarily to the seasonality of cash collections.
I would now like to close with guidance. We have gotten off to a strong start in fiscal 2023, and we see positive underlying demand trends across the business. Our outlook for fiscal 2023 reflects these trends while also considering a wider range of potential outcomes to reflect the growing uncertainty in the economy. I am pleased with the progress that we have made on our integration initiatives during the quarter. We believe we are well positioned for the long term from a growth and profitability perspective, and our -- ability to realize the $110 million of adjusted EBITDA synergies by 2026.
With respect to ACV, we are maintaining a target of 10.5% to 13.5% growth for the year, including 4 points of growth contribution from the DGM and SSE product portfolio. The spending environment remains favorable overall, and we believe we are on track to drive greater contribution from the DGM and SSE portfolios in the second half of the year. We are maintaining our bookings guidance in the range of $1.07 billion to $1.17 billion, which includes $547 million of contracts that are up for renewal in fiscal 2023. This includes approximately $111 million of contracts up for renewal in the second quarter.
We continue to expect revenue in the range of $1.14 billion to $1.2 billion. We expect license revenue in the range of $765 million to $826 million and maintenance revenue and service and other revenue of approximately $312 million and $54 million, respectively. From an expense perspective, we expect total GAAP expenses of $1.197 billion to $1.207 billion. The increased expense outlook is related to acquisition, integration planning and amortization of purchase and tangible expenses associated with Inmation's acquisitions.
Taken together, we expect GAAP operating loss in the range of $57 million to $5 million for fiscal 2023 with GAAP net loss in the range of $32.5 million to $22.5 million. We expect GAAP net loss per share to be in the range of $0.49 to $0.34. From a non-GAAP perspective, we expect operating income of $503 million to $555 million and non-GAAP income per share in the range of $6.76 to $6.91. From a free cash flow perspective, we continue to expect free cash of $347 million to $352 million. Our fiscal 2023 free cash flow guidance assumes cash tax payments in the range of $94 million to $104 million, which is unchanged. To wrap up, AspenTech is off to a strong start in fiscal 2023. We are successfully executing on our integration plan and have set the foundation to deliver on our near- and long-term financial objectives.
We believe we are uniquely positioned to create even greater value for our customers and shareholders over the long term and are keenly focused on maximizing the opportunity. With that, operator, let's begin with Q&A.
[Operator Instructions] And our first question comes from Matthew Pfau from William Blair.
Tony, I wanted to ask, I appreciate that you left the guidance range is the same for your key metrics that you account for a range of macro outcomes. But with another quarter of data points and conversations with customers, do you feel any differently about the probability of the low end versus the high end there?
Let me look, like we said in our prepared remarks, today, we see a solid macro environment out there for our customers where prices have remained in a very good range for these customers. We continue to execute on our CapEx budget resulting from investments approved for them by local government and other type of entities. And as we said, it's only chemicals, especially European companies where we're seeing as a valuation of the performance around revenue growth and margin.
But we've also seen that kind of situation before where these customers also decided to invest more on technology to drive greater efficiencies to try to overcome the margin degradation. So overall, today, we feel like the macro environment has remained and will remain through the remainder of this calendar year. And so far, what we've heard anecdotally that budgets will still be solid for calendar year 2023. The refining industry, if anything, continues to improve their performance. If you look at the results announced by some of the independent refiners here in the U.S., incredible results.
So overall, we will feel good about the outlook as of today.
And then on the increased focus on energy security and your expectation to benefit from that, is that something you're already seeing play out in your business? Or is that something that will take some time to materialize?
Look, I think some of that is already playing out through a final investment decisions around some of the LNG facilities that are going to be able to increase LNG production and the export out of the U.S. into other parts of the world. If you follow Qatar, as a country, they issue a significant or they signed significant agreements with some of the major international oil companies for share production agreements to increase their gas production as well. That all eventually flows through our customers starting with the E&C and eventually facilities that are running that and they will have a chance to optimize their operations and improve their reliability.
And eventually, we also hope to be getting them excited about deploying some of the microgrid technology capabilities from our side. So -- so overall, we just see a good environment and one that is driven by multiple factors that are benefiting AspenTech.
And our next question comes from Rob Oliver from Baird.
So Antonio, just following up on Matt's question, just regarding the macro, I appreciate your commentary. It sounds like the only change or a modest change that from your prepared remarks was around chemicals where there's some uncertainty there, and you mentioned supply and demand issues and stuff like that. Can you talk a little bit about how that then is factored into that wide range of outcomes, meaning are you seeing strength in other areas that are potentially making up for that in driving the ACV?
And then the second question, which was my follow-up was just around your comments relative to strength in upstream, really interesting. And I think you alluded to a combo, core Aspen SSE deal, if I heard that right, and I apologize because the audio wasn't great for me. But -- if so, can you talk a little bit about that? Are those deals happening right now, what the pipeline looks for that? And what the kind of increase in deal sizing opportunity looks versus what you saw for core Aspen?
Yes. Well, let me clarify as well regarding the first part of your question, Rob, I mean chemical companies reported in their second calendar quarter results, meaning the June quarter, record profitability and record revenue. Now what we're seeing here in the September quarter results that are coming down from that record profitability and record revenue to perhaps profitability more in line with their historical performance. But nonetheless, it's not what it was back in June. So while we're keeping an eye on this, our chemicals business performed well in our Q1 fiscal quarter.
We see it's a change, and therefore, we're monitoring to see if we detect any behavior or any behavior change from these customers. But so far, so good. Look, if there were to be a deterioration, if there's one, it's something that we have accounted for in that range, as you said. I mean what other puts and takes, well, you said it, we believe that the combination of AspenTech heritage, AspenTech engineering suite entities with a subsurface times and engineering suite is a great create new offering for our customers.
Customers get excited about the potential to optimize their operations, both combining the subsurface and above surface facilities. And this is leading to not only great conversations, but I [indiscernible] different perspective about the new AspenTech from these customers. The relationships that we're going to have with us going forward, which is changing the conversations completely.
So we're optimistic that the SSE business could have the potential for overperformance in fiscal '23. It's early days. But based on the conversations in this first quarter, again, gives us a degree of optimism.
And our next question comes from Andrew Obin from Bank of America.
I just want to ask a question about the sort of the Inmation acquisition because I think it's actually very interesting. It goes to the heart of your working closer with Emerson, right? Because I think -- I believe Emerson built their platform based on sort of data capabilities based on that, right? And you had a competing product. And now you're effectively taking over that sort of rationalizing, I think, the 2 approaches. Can you just expand on that? And just maybe talk about where you see more opportunities to sort of rationalize the approaches between the 2 companies in terms of technology?
Yes. So -- and Andrew, you're exactly right, Emerson -- Emerson was an early investor, Inmation, they invested in Inmation in 2020, and we're starting to see some of the benefits of the relationship between Emerson and Aspen Technology.
Emerson highlighted to us what they thought was the strength of Inmation and why we should be interested in Inmation. After doing diligence and doing our own assessment of the capabilities of Inmation, we felt that the technology would be a step change in our capabilities. And now while we closed the transaction. What I can tell you though is and the rationale for why we think Inmation is important. The fact is that over the last 12, 18 months, as we've engaged with customers in person, more and more customers are telling us that while now they have all their data in these massive data lays that are being created by the cloud services companies.
They have a real difficulty making sense of all this data related this data to each other. And therefore, they're asking for help in that regard. And this is exactly what Inmation does. Inmation brings order to data, we contextualize the data. It creates data relationships. And as such, customers that deploy mentioned will be able to then explore the latent value that exist in the data by using that data on in applications or other use cases, for example, with AspenTech applications capabilities, so we're very excited about this.
It's going to become the cornerstone of our IoT business. And now, well, now that AspenTech [indiscernible] a way, Emerson has increased its investment information because they own multiple in. The patients now in AspenTech, and this is now the 2 companies are going to be basically the data foundation for our customers going forward. The other areas where there will be opportunities, certainly in the control, advanced process control area, historian and other opportunities, but this is all areas that we still have to explore with Emerson.
But this is going to be part of that commercial relationship that Emerson and AspenTech has established. But also has to be vetted by related public transactions for [indiscernible] to mature that is properly done at an arm's length that relationship. So we're very excited. And this is the first factor perhaps many of these top of relations of going forward.
And our next question comes from Jason Celino from KeyBanc Capital.
Maybe my first one, I understand that Q1 is typically a lower sequential growth quarter as been always like that. Maybe why did ACV and particularly, the heritage annual spend metric, it was kind of flat, decelerated just a hair, but anything to call out on that?
Let me give you an answer then Chantelle can [indiscernible] follow up. On our lowest growth quarters, typically, and that is the case. We're happy with our performance in Q1. Chantelle highlighted in her prepared remarks, that we had a transaction in Russia that we had to write-off because eventually didn't need the requirements under the tensions structure that exists or framework that exists with some Russian companies, and that impacted the net growth in ACV that we deliver. But otherwise, we would have been [indiscernible].
When we think about acquisitions, so in nation, it's interesting that, that lead came from Emerson and obviously, we have Micromine. But -- how should we think about the pace of your acquisitions going forward? And then maybe how you intend to fund them if you do see a pickup.
Well, let me look, we certainly also want to be [indiscernible] on the M&A front with regard to how much we've taken on with -- I consider the first July and August to have been months of a lot of work. It required a lot of, if you will, activation energy to put in place everything that we talked about in the prepared remarks so that we can execute the rest of this fiscal year and beyond.
So I would say we were through the bulk of not only integration, board also sort of the transformation infrastructure that we needed to put in place to be successful going forward with the [indiscernible]. We are patiently waiting for the Micromine transaction to close that a well-run business has been run by private equity for almost 4 years, high profitability, high growth. So there's no little transformation that has to be done there.
It's only about immigration. And Inmation, it's a small company. I also believe that if you want to be judicious about M&A, you do acquisitions when they're available. and that availability will be say our next move from an M&A standpoint. But we're making good progress with we built an organization that is focused on dividends and integration of acquisitions that is performing incredibly well. So we -- I believe that we've grown a new mass in the company around diligence and integration of these acquisitions that we didn't have 2 years ago, and that is a muscle that will rely on going forward.
Yes. I think the other thing I'd add, Jason, just to kind of give you is we're in a comfortable zone on what the activity we are doing. And each of them have their own flavor to it for their own disposes. So like Antonio mentioned, the Emerson owners have 7 months. We have integration. We had to hit the ground running. We had the muscle number built in the IMO team when we have. If you look at Inmation, it's a horizon to play more of a tuck-in. So -- and then Micromine almost like its own standalone business funding. So I think that the difference in a variety of them also complement that it's [indiscernible] venture that we wonder look at, Jason, versus all the same, including strain on the same board in the same team in the organization. So I think that's another way to look at it.
And our next question comes from Clarke Jeffries from Piper Sandler.
First question is just Antonio, how optimistic are you about the profitability and demand environment for the refining industry? And maybe specifically LNG lots of headlines around reaching kind of peak storage capacity in the EU right now. Any signs that you're seeing in terms of potential cuts to OpEx budgets? Or do you see the current levels as still elevated enough to facilitate those final investment decisions for those export facilities or any other business related to LNG that you have?
Yes, let me first address LNG start and then I'll talk about refining. Look, the fact is that when we these customers, operators making the final investment decision, they're making an investment decision for a 20-, 30-year time frame. And the outlook for the use of LNG as a source of energy. So these fluctuations -- short-term fluctuations, I don't think they're going to change anything. The fact is that gas is considered will be a transition fuel for next zero-carbon emission ambitions. And the demand profile is there to support that greater investment that's gone into the ground to build this asset.
So I don't think any of these changes for the storage is filled on out in Europe. With respect to refining, Look, the fact is that refiners are feeling very bullish. I had the opportunity to meet over the weekend an individual in the trading function of an independent refining company. And I was actually surprised of how optimistic this person felt about their margins going forward because return only now that jet fuel demand is starting to come back, but this individual was also incredibly excited about diesel demand coming back, and these are 2 things that have been missing over the last 12 months.
So -- so this individual was not only optimistic about it today, but even the next 6 to 12 months. So -- so I think -- and it's what we're seeing from refiners. Good solid continued spend on our technologies.
All right. A little bit of technical difficulties there. But for a follow-up question is just on the pace of migration for SSE and DGM. I mean, certainly encouraging to see the SSE suite launched and DGM coming in the second half. Were those time lines ahead of schedule or roughly what you expected when you set out with guidance? And any incremental confidence you have in the ACV growth in those segments for the rest of the year? Either off of benefits to attrition or kind of the net new funnel here?
Yes. I believe [indiscernible] best R&D organizations in the software industry, and they perform accordingly. So they were ahead of plan on the release of the SSE suite for Windows. I hope they achieve the same feed for the Venus version and the DGM suite because that will help us with our trajectory. Those transformations are hard, and you have to build momentum in the transformation because there's a lot of sort of infrastructure we have to put in place systems, processes best practices organizations.
And we've done a lot of that now in the Q1 quarter. I believe we've built momentum, and we'll continue to build momentum in Q2. And that's why in the prepared remarks, we stated that we expect a lot of the transformation benefits to start showing off to really show off in Q3, Q4. And look, from my own assessment, I do believe that our [ year ] will come together beautifully in the Q3, Q4 for quarters in the first half of next calender year.
And our next question comes from Mark Schappel from Loop Capital.
And Tony, I just want to go back to your comments around the chemical industry and just to make sure I understand that correctly. Are you actually seeing usage or buying hesitation from these customers? Or are you just raising a few red flags, given the recent profit warnings from some of the members in the sector?
Yes. Just to say later. We didn't see any behavior change from chemical customers if you want. We just want to acknowledge that we're seeing this dynamic. And like I said, they're just coming down from record profitability and revenue in the quarter to quarter, something more normal, but nonetheless, it's a change, we just want to highlight that to all of you.
Helpful. And then talk a little bit about the APM suite. Maybe just give us a little bit of an update in terms of any new pilots or customer wins that are worth mentioning?
Look, so we keep our update for APM to the half year. So we do that in the January call. But Look, we consideration. I do think the market has sort of unfrozen from the pandemic period. We're seeing a lot more engagement with customers. We are seeing also bigger deals in the pipeline and more interest.
I also think that customers after 2, 3 years of trying to figure out what everything that they were being told by all these suppliers of technology and that they're sort of cutting through the noise and focusing on those technologies and capabilities that they think will help. And I'd like to think that AspenTech is in that category.
And our next question comes from [indiscernible] with Wolfe Research.
And so just a few quarters into working with Emerson software assets, what are the key impressions and what has maybe surprised you most as far?
Well, I'll give you my impression and Chantelle give you hers. Look, first of all, when I first met with [indiscernible], one of my key [indiscernible] was the oil side business, because I felt they had the potential to truly become a technology leader in the utilities industry. And basically, the last 4, 5 months have only corroborated my -- what I thought was the case.
They have great technology. Their customers love their technology and what they do for them, and now with the scale of the new AspenTech and our channel to market on a global basis because they're a very North American-focused company, we'll be able to accelerate their expansion into international markets. So very excited about that. Look, it's been a great presence of price as well.
They have unbelievable technology. We're going to be investing in that technology to accelerate some of their innovation. But more instantly, the whole perception of SSE by customers has changed now in their partnership and ownership by AspenTech. Again, back to this opportunity to optimize subsurface and above surface facilities, AspenTech's on capabilities in software and how we can contribute to and SSE's expertise in upstream and now AspenTech the only company in the market that can model the entire petrol supply chain from the rock to the corner gas station is a very unique capability.
I started having meetings with customers immediately after we close the transaction and have been so excited about what I'm hearing from this customer. So I'm very optimistic. I love the fact that we own these businesses. And they totally reposition that and help us reposition usability, CCS, geothermal energy, electrification with our own capabilities around efficiency and clarity so -- so it really from a strong sustainability position going forward.
Yes. I think the things I would only add to what Antonio mentioned I agree with those. I would say for the overall, I'm completely energized by the intestine into the synergies that we have together. So I think that's fantastic. I think for the [indiscernible] DGM, I think that the team realizing the tremendous opportunity to digitalize that industry, the transmission distribution industry is very encouraging. I think for the SSE side, having the team jump in with the token pet that's now available for Windows and Lynx coming. We believe that to take that and run with it in the first quarter. It was very impressive. So I think this really good data points in the first quarter is very encouraging.
And I am showing no further questions. I would now like to turn the call back over to Antonio Pietri, CEO, for closing remarks.
Thank you, Justin, and thanks, everyone, for joining what is the first earnings call of the new AspenTech. We look forward to engaging with all of you on the road here in the next few weeks and months. Thanks.
This concludes today's conference call. Thank you for participating. You may now disconnect.