PTC (PTC) 27 Apr 222022 Q2 Earnings call transcript

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the PTC's 2022 Second Quarter Conference Call.

During today's presentation, all parties will be in a listen-only mode, and following the presentation, the conference will be open for questions. I would now like to turn the call over to Matt Shimao, PTC's Head of Investor Relations. Please go ahead.

afternoon. Good and XXXX Savannah call. quarter to welcome you second PTC's conference Thank

is through the Heppelmann, replay today Financial www.ptc.com. Talvitie, call Jim today of Officer. broadcast Executive conference On be are at Kristian the Chief call call available and audio an webcast Officer; will and Today's being a live later Chief

from deal guidance those may operating results. future this PTC call, to results forward-looking the will During in actual such projected make with statements statements. as differ events forward-looking materially statements including future Because

statements Additional materially information with PTC's filings Form only during concerning call be statements. PTC forward-looking these Exchange Commission to as factors XX-K, that of well as assumes as could update in other in cause from XX, guidance statements the forward-looking no actual US results annual found are this including the XXXX valid today's forward-looking date The Form and differ today's report Securities April press on to and obligation those provided and in XX-Q can release.

the can non-GAAP not will on the GAAP principles. financial over These I'd be today's comparable to made Chief in Executive available PTC's, to reconciliation measures directly to turn with release Heppelmann. quarters our press of that, With measures. call discuss accepted A generally measures financial website. PTC found like in the are the the prepared Officer, most measures Jim non-GAAP non-GAAP During call, accounting

be for all thank my everyone you afternoon To throughout constant commentary Good Matt. Thanks in currency. growth that discussing us. please will simplify and joining things, rates I note

financial performance that share Turning strong in another pleased to slide to I'm delivered X. fiscal QX. PTC

guidance and all grew ARR and churn billion caused metrics strong. particular of Bookings renewals we Russian geographies. segments broad-based strength exit ARR. organic by ended XX% our was the the than with market. came self-inflicted very and faster All saw to QX the decision our ARR in We $X.XX to Of note, above accelerate despite growth our were of across

The line We QX year-over-year line of adjusted strong cash The highest strategies track at bottom free of and translating the In Day expansion growth. XX% operating are XX% we also better was million, was even ahead seen. our our our we've top guidance. up non-GAAP results in $XXX margin performance we the margin December continued quarter record outlined the our Investor at growth into of generating expected. flow

Moving slide to X.

ARR, to offerings. While priority customers. remains and cycle were for an three the transformation Growth velocity digital continue life QX macro across bookings up the our see have and all was both and geographies. strong Bookings year-over-year mid-teens than product environment which potential PTC carefully, ahead, the monitoring sixth with consecutive we're for and important global us Driving quarter help geopolitical improving broad-based. that To model the provides strength our rates, the our global grown achieve faster our you was thread in financial in an any understand ability our volatility on of confidence targets lie dynamics, to half appreciate with you year. about of business for business why creates growth. resilience I'd expand ensure to you the together think our model renewal ARR to may as like acceleration the demand situation was we digital in strong that macro bias back across

a take Let's look X. at slide

over slide, three as growth the on we the XX% just you in we the see previous built the is also but of was QX QX ARR side left-hand based, quarters on metric. can momentum delivered ARR four-quarter the growth a well. On not that rolling performance

now recurring was mean year. at the time the larger in book entire we say is business last this when second it So XX% XX% we of ARR than grew quarter,

strong the of as grow. bookings impact Bookings such long company. some to foundation me as While it so provides of round that, by margin. the stability also rolling by ARR dynamic churn the resiliency the QX, this Remember you work and churn any giving quarter, exceed currently for results a dampens in in the simplify bookings numbers exceed big run will math, with. directional own your you wide To scenarios, let help single

PTC billion, $XXX has adding Let's million annual say annual a in around million ARR. while basis, on And rate seeing in in $XXX churn. we're $X.X run bookings,

several stepped rate enterprise million next which is and billion performance. grow up better the downturn. several changes, more scenario of to digit years history that ARR understand remained to XXXX, to $XXX churn in shows sticky growth $X.X case, growth. down years then hypothetical PTC with the million because that, year start stopped $X.X a remain XX% our Note macro double-digit for That's with growing $XXX steady at let's software, bookings provides for sensitivity our macro high-single the ARR would and indefinitely where step and XXXX ARR run of again experience steady, To Over and by would after with through billion, $XXX In by that. renewals flat million. being consistent a in

for the about If bounced which business, in case XX% deliver in of quarters Europe downturn represents which you XX% could forthcoming we'd XX% and model our create over then declined growth by alternate year. our bookings still a you're of two where back, ARR XX% an concerned

the you'll the more might draconian XX% business. in quarterly to quarters, in you a an results that a hypothetical seen want as also case next get it renewal been across which over still ARR When for are consistently global X% bookings which reduction you macro If the grow matter see scenarios you no actual downturn next scenario, model year. mind we've business macro due which dual very considerably COVID Frankly ARR any better. several have accelerate now, to four raising growth right growth peers, helpful with ARR potential PTC declined power the you benefit as sharply position bookings In in for we've the we're all strong our ARR. acceleration of because for seeing well. also summary, Improvement assuming company pandemic run model, could rates, is favorably what a the conditions faster rebound, than before for industry to those don't that ARR, examples, Keep are since in effect ARR of did to were has recurring in creates XX% have quarters design XXXX, is as effects the again. full acceleration experiencing results, as the cyclical FY bookings in been, good we remain growth who they while guidance compared same slowdown to when why very through position year. these XXXX our model. PTC more rebounding we're is the PTC's resilient

from keep Some even comparable place is a to a in this leadership will wonderful of line business it The for model, years discussion lines. growth their is subscription took in our that and of hard put us top come. thing, experienced takeaway PTC which position years whom work in declines industry to in our

on, ARR QX, all Moving our our QX X growth performance on quick take we business strong units. at Slide geographies. geography across ARR by In saw before a look let's turning to

the from PLM our strong ARR Velocity was drivers segments core our and primarily AR being Russia Americas in and driven growth contribution our Europe, Europe growth the grew growth the across PLM core strength business. another main the despite strong in ARR our was in by CAD continued product CAD board In IoT with strong segments and All XX%. in segment. growth exit. businesses growth with XX% and We saw and results Our

about well. the Europe businesses has In and see the bookings our growth second, in the macro largest first, Europe know mix I in are FSG as model exposure in to addition, our to Europe; highly QX. there, investors Europe to solid versus perform concerned so that: and I'd I've direct demonstrated and continue reiterate that delivered continuing velocity we're is performance of channel and resilient. environment to resellers strong like quantitatively,

APAC ARR our core CAD with being the was growth and in businesses again main PLM Our drivers. XX%

this, the in combination a from and solutions are revenue to consecutive Within model of SaaS ARR share. grew Bookings with CAD QX PLM strong the and X. growth with in In for low attribute XX% we're recurring Digital on product of and with QX while that thread on grew delivered Next, digits, let's business faster our the grew was I we core taking another starting double which very case, seen ARR yet, low double-digit business. quarters the growth. transformation, reflecting our across double-digit core In rights performance we've our performance CAD market initiatives. look digital XX at now Slide performance in business, best-in-class largest This digital strategic the growth units executing Core, growth each Thread mid-teens. segment, and of our well sold PLM churn the tailwinds demand our in best solutions sticky

growth Windchill+ the And and we is operational You saw SaaS just offerings also which now the follow next-generation core with quarter, premium Thread, XX%. plus see is PLM of higher strategy. Windchill iceberg during may our and have solution. enable sales ARR lead you'll a technology of XXXX differentiated becoming Plus bigger we tip similar improvements of play. FY contains us the Digital Creo is growth that the profitability and noted, Windchill+ our and beyond. in Windchill+ launched In SaaS

end to acceleration sequential of and get by year. remain handle on good operational a track we progress the growth made was While the to the modest, two

of Performance deal Digital Solution, several for deals in great which in helping and of going food DPM all to Europe. see we Following pleased half results looks quarter. renewals Servigistics abbreviate industries, deals, solid these size nine QX in beverage. strategy the various landed the strategy these Rockwell good is and strong particularly of X% aerospace and into our including six DPM growth. launch the value high-tech, on ThingWorx initial FSG, Though started back With ARR to I'm and figures. PLM Americas our average a And products. DPM, different we keep customers QX, Growth was produced to with year. Management each first in across delivering deals had automotive having new performed and both of by dedicated as and brought Arbortext companies the these retail our terms another to focus were was that strong of the churn. defense, drive FSG pipeline well, and

By quick a design unit, customer backbone Before give that new specific are capabilities their ThingWorx I workflows. a of stories of Windchill. will couple is and XXX,XXX a through market nine. beyond Creo XD Bosch you Creo me With transformation Velocity processes, enhanced across PLM how is taste engineering, with driving start how capabilities. Creo to end-to-end productivity with transformation improved XD and our combination faster. enable example digital world of leveraging a at for leveraging business our model-based scale. This and Bosch slide turn customers of is of leveraging drive Bosch technologies digital I'll to products and data Bosch is run supplier is engineers, massive moving Bosch services. manufacturing to employees, and XX,XXX challenge about including Windchill the inspection global on improved let in drawings to as system using a Bosch and bringing key

critical accelerate slide that ESG material story upfront gas Creo-based on enable. environmental is market. Cummins the Next, largest to long journey. and better By and has diesel engine transformation world's and and of independent process, time their interesting using and goal digital ANSYS-powered it their to simulation Cummins XX, able usage, is products we design design a reduce create manufacturer generative reduce company help been a to made has their Cummins impact in part an

multiple to the Onshape with was that has SaaS both to and PTC the their market number unique QX, serve a market, this to in demonstrates investments. faster ramp a Onshape Velocity product product With buying and segment criteria. market Velocity there's business segment ability times and development distinct agile CAD PLM segment on our which and and as and both XX. slide go-to-market continuing than one Year-over-year, we're our Arena, prioritize Turning for Velocity growth growing of XX% the Arena vibrant ARR and

visibility take supporting to of deliver to showing processes and you innovative critical to are SaaS is move global quality slide team a collaboration PLM complete to how solution is using Velocity Arena's across where example design teams. faster. empowering providing Filtronics enable product and benefits The XX Filtronic through Let's like and documentation to products globally-distributed into significant. control I'd Arena product

has been engineering example, XX% time half change cycle as well. time the cut by was and in For resolution issue cut

Turning two and and We transactions week additional last to announced recap slide like provide I'd XX. both some context. to

management Software, agreement we company for First life or announced ALM next-generation $XXX cycle application an million. acquire to Intland a

industries, and bolster potential matches into regulated a and market product size. key industries where portfolio products increasing Codebeamer differentiated ALM the and software. will in from standalone becoming offering entered market good within Windchill family suite. standard next-generation is decade both PTC growth by ago, safety Bringing subsystem significantly both a in is suite profitability especially and by product surprisingly as large software critical ALM PLM their background, with growth ALM when of and become and well-established and important our For the a our fast MKS sold the PTC's is great are integrity their the suite PLM our company The ALM momentum. Intland ALM Codebeamer has we an strong strength and increasingly strong that's of acquired Intland new who products for their offering. a automotive

both it point achieve growth to to unit, roughly Codebeamer XXXX ALM join a is FSG of acquisition expect FY the will part our expected as synergies cost our of acquisition. and to will with inorganic existing be ARR segment. closes, results. this so Intland percentage When reported revenue add our We ARR

this going which FSG to of forward expect acquisition range. in growth be the mid-single-digit increase expect growing now consistently rates We the will we

professional of we executing the high-margin customer ecosystem software, we the our power the been partner Infotech PTC's we've to moves that focus sell services efforts services strategy setting. ITC software continuation an strategy. deliver announced further on SaaS a a that a to unlock long-term to This in while partner value our long-time agreement Second, professional to to of portion a of to business look

unit DXP ours. scale PLM and the that at impact so SaaS on-premise coming on ship we DxPServices, This large professional unit talent lift projects, PTC at required doing we're into we're thereby the vector and customer as are to centralized our the planning Investor Day, the financial end system ARR. system to efforts taking of the two the resulting into our put comment bearing our These de work than SaaS growth to back a rather is operations. initiatives these ship of As a each described we perform and base, new instead upgrade will of ITCI into we in new key P&L the has than allowing cloud. transition ITC's a the years. some and of lift on where a a services to projects customization our it own installed will thousands because key potentially the on the This of forward. deployments is DxPServices we the at it projects our site expected for up and play transactions. to ramp projects at partner no to scale on the December carrying called With assuming component professional project transaction our looking further program a of SaaS organization shift move joint services be need running these customer Kristian with happens PTC capacity needs be ownership and direct to run role will up Rather lift services

We expect pleased PTC's both XX, that and then To in close wrap-up on I'm ahead. QX. the lies will position very opportunity slide with

initiatives. the poised growth customer momentum we be to year FY and and products first in tailwinds enter strong what and bookings double-digit we of and with other accelerating harder is blow portfolio quarters our fifth renewals is IoT coming accelerate aligns growth. XXXX, have and of as We're been unique the ARR half of consecutive DPM gain will it Throughout well as ARR and second the SaaS to and further as demand. compelling half Our of growth

businesses following Our profitability up continues the to we to expand start curves. the year the of start-up and changes implemented at mature in our as J continue

Kristian pandemic raising has model in financial details shareholder more never proven think XXXX. face in better highly row a for that, during the be I turn We're for position in slowdown the even a to resilient company the of on Our the over has value. second the guidance it to like to and in I'll our Kristian? quarter been results. With a create

afternoon, Thanks, Jim, everyone. good and

I'd to results guidance and ARR currency and Before and I that discussing both as be like will results, non-GAAP I'll our reported. note review be constant in references

Turning XX. constant to Slide QX, At end up our billion, the $X.XXX XX% was of year-over-year. currency ARR

$X.XX solid larger and SaaS of basis, for ARR billion. thread growth represented was guidance sequentially. groups of We delivered businesses digital $X.XX as-reported Velocity business year-over-year Our QX saw in the which to for was constant ARR continued XX%. a ARR both QX, mix overall our On ARR and billion business both we provided growth above the currency range in year-over-year and an

of the Foreign Ukraine, and was million March, in churn performance. QX QX with QX. was a We've to $X $XXX Russian headwind we In we and ARR, adjusted had collections to foreign exchange XX% following a flow is in our million free cash as QX was foreign strong exchange we up than a been Russia. million ARR. included QX, Russia both free our takeaway to delivering had solid cash guidance. from were cash revenue in $XXX another due restructuring despite our the anticipated. reflecting $XXX in and quarter accounted for impact targets. $X our million from of operations of QX of impact we've would ahead $XX million, and Adjusted guidance operations grew operations outcome Considering expected other flow that headwind payments. the flow million our sales in and $X.XXX adverse this of and reported seasonality increased billion. and cash $XX and XX% million ARR strong QX well the exchange, Free on in free that $XXX on also In cash in came line million cash related business in $XX year-on-year. Exiting as discontinue executing of year-over-year. X% invasion Cash year-over-year was The flow because announced on lower related headwinds was slightly main million CapEx flow

by revenue impacted As XXX. previously discussed ASC we've is

line generation. revenue ARR revenue our that and QX but business to you million. $X performance believe constant the best by best are in don't about and basis $XXX top our understand indicator cash we on to performance, So was a underlying rates would revenue guide our rather metric the of million as FX currency impacted growth

on move provide XXX. to in I our noted non-GAAP ASC color operating Before QX as to impacted earlier. expanded sheet, Revenue the XX% some a like to Jim balance This to compares I'd ago. is by XX% year margin on which

months announced So other margin, and benefited derivative towards expectation our the some our ago that with acceleration we R&D in in Still, set well. duplicative metrics shift worth we such in we as field costs restructuring operating be eliminating alignment are operating margin organization our mix as in QX. functions all impacted EPS an Six mentioning our QX it's expense gross would would that strategy. that SaaS from and

enable You believe improvements the have non-GAAP We XXXX margin fiscal more a can our And in sustainable year-to-date in progress roughly us will the we operating are made we've driven we've structure. operating our now with QX performance. line results. to for deliver and see optimized

$XXX equivalents with QX million. and ended of cash We XX. Slide to Moving cash

billion an about Our gross debt rate with interest X.X%. aggregate $X.XX was of

million $XX conjunction proceeds sale quarter. we generated pay million to through cash the facility operations on credit our in we Matterport. in down of of This cash During in from equity the used the revolving investment $XXX with our second second quarter,

for communicated focus QX. as in Regarding we'll the we've And $X repurchases XXXX our million quarter, remainder program we our share fiscal with delevering. completed last on settling the for of repurchase planned year

remains on ratio Looking forward basis to XXXX and a assuming below times. fiscal three go-forward our debt-to-EBITDA

flow Our share goal to approximately return our cash repurchases. is via to XX% free of shareholders

currency tables a as well we by set and as-reported both Next our our statements details. product constant In We of Slide our IR group. financial share financial that ARR. to as data XX post website shows has that ARR ARR file

we when our for periods. rates use As a all plan year currency we reminder, current calculate figures, FX constant

expect Our Russia. change. figures our on fiscal to With constant fiscal negative. also all September currency do performance exchange end the currency moved context raising FX first XXXX currency our on is XXXX or rates XX% and ARR XXXX. to quarters ARR reported for $XX you And for constant XX, guidance, way exchange evaluate currency positive line in rates for have because half our analysis remember significantly as the end which exit best can constant we exchange based now rate basis. expect growth XX. billion, constant be QX, to we by are of –– on removes fiscal reported our range based of the FX than is on using to $X.XXX as prior foreign expect the that well. to XX, provide XX% expected new strong and and QX and lower fluctuate the these ARR ARR of constant that for to currency illustrate, currency see to rates reported guidance now the ARR for I'll movements our constant to ARR on despite a is XXXX. The at to XXXX. FX translates our believe foreign XXXX XXXX, to move calculate it of top periods in This And Slide and expect XXXX. of we since from if from the We're billion exchange to plan $X.XX QX, the of be all on fiscal rates the ARR because slide between business in guidance would fluctuations the impact performance the as rates To the fiscal QX We're report be to million. because Based This headwind million. is of significantly on which for September as $XX approximately fiscal impacted we we important headwinds We

$X.XXX the For this be midpoint constant constant At currency to ARR growth. to $X.XX guiding XX% equates to we're billion QX, billion. currency

in IoT to businesses ARR driver continue the end We expect or of FSG Velocity fiscal said and core which market. to of of from year. well CAD strong the at in strong our represented in to the by $XXX XXXX We're us do our of raise XX% approximately more the cash to and for our reach PLM seeing is million we're FX That AR operational ARR execution continue all offerings, Russia and our are and our growth ARR maintaining guidance main offset exit. discipline XX% QX. operations guidance helping demand customer as very XXXX And fiscal headwinds and the the

Our guidance million, year. million. beginning at for flow our $XX guidance the that approximately to QX. for the cash from $X free fiscal million full for flow $XXX year million CapEx down And spend we're approximately $XX We've is target CapEx of cash is raising for expecting set from QX operations we about approximately QX XXXX $XXX Therefore, million. which free of approximately guiding we're our $XXX of million and approximately to cash to updated

dynamics QX because be expect hiring our generation fiscal to cash flow these second as in the expected of generation our The in to XXXX our SaaS we expenses driven invoicing the continue seasonal first occur year flow normal expect primarily pattern cash by fiscal We our half XXXX of fiscal continue our and to seasonality. in investments collections we in increase is to lowest majority our half ramp quarter. of

to compared these to PTC a for where have are employees restructuring we've expectation into at. to looking some new $XX Our guidance quarter flow payments good free have depart some moved as of our of to includes million fiscal $XX departed employees XXXX, Both million things. that $XX ago million million been expected $XX were roles and at otherwise cash of

have been have in restructuring We fill hiring environment. able challenging payments roles with and good less a new people open

fiscal flow of In payments free $X adjusted addition, that XXXX. target fiscal incurred in half our $XXX to the also raising XXXX cash with approximately flow our of guidance, million Therefore cash consistent free assumes were first approximately raising we're our guidance transaction-related million.

to were transaction-related expect of payments million QX, our $XX approximately cash payments and we incurred approximately the bringing flow For of million. $XXX half million free which $X first in adjusted restructuring approximately

exchange based revenue. headwinds low revenue forecast and the remainder year taking Moving for foreign our full XXXX. our up on of fiscal our Despite on end by and the $XX to exit, million guidance Russia of QX beat we're

range $X.XXX influence revenue now billion. billion ASC generation hence we So The we're contract customers makes X% to wide is to growth bill year-over-year or difficult as revenue lengths. regardless our annually guiding range. Note on-premise for to the predict new XXX typically not subscription to does cash guidance is ARR X%. company $X.XXX term revenue of an upfront

announced Turning to earlier expect Jim we week. Infotech terms Slide XX. provided of last Software we impact financial in the ITC transactions Intland and some highlights the from

yet. to because these deals to both closed our have transactions While financial impacts are expected close during we haven't QX, not incorporated expected the guidance

and all million to we In approximately constant when ARR in the we of update our currency financial meantime, impact report a expect directionally QX metrics have officially fiscal positive transactions guidance $XX will for We earnings. 'XX. these

to we increased in accretive immaterial Intland fiscal 'XX expected operational 'XX. cash expect transaction-related are offset in second free cash transactions our half. an fiscal our the the interest we have incremental FSG flow impact to in flow, to these as We incremental along regarding fees And expect will assets. flows And expense the ALM and in be cash other free product transactions with to report group

ITC the offerings. Going professional over a impact forward time expected our guidance Infotech us remarks when XX. results I'll SaaS on Again, report Slide drive QX ARR the is illustrative lot to our profitability. explained, not services my deals result our have we'll And you of provide in expect out we currency to metrics -- lower help two these material expected detail close ITC constant on transaction adoption as Jim to but we an point. by today update at model taking a at that more through all and prepared revenue,

QX Here constant of ARR and fiscal of guidance to get over six is the quarters and the for to an illustration progression needed our currency we're past showing midpoint what 'XX. our ARR

our First QX the of of due acquisition growth benefited XXXX that to recall fiscal Arena. of in all, ARR

'XX first in ARR of taking $XX million to So first the compared fiscal half into half consideration, more the basis that fiscal an approximately organic on of we added XXXX.

sequential Next calling QX and QX ARR shows that's for the box. ranges. your at illustration shows for billion at $X.XXX to attention The midpoints. billion guidance the QX the both $X.XXX needed and guidance QX ending targeted model in midpoint a of This hit to our green ARR

guidance. we we of in ACV of second mid hit as As the in 'XX, second constant We did that need some concerns ’XX. half half we the believe XXXX fiscal of macro new that even fiscal ’XX of to can we same in we're the to add do fiscal order of point more in amount half well the ARR see you the have in second currency did also fiscal to starting of deferred noting that, about positioned given the and

that So operator turn Q&A. it hopefully and and with that's over we'll helpful to the begin

will Joe ahead. [Operator Instructions] first our Baird. with come from Vruwink Please go And question

today they're are in how stand of point more have I'm mid-XXXX But ask. And would past? lot appreciating Maybe today than your the strategic start customers on other or like contrast been longer-term you is the Hi macro the guess Hey, it this I at about benefits. customers like I'll areas just to parallels periods with macro have but implementation that and separating different and how maybe appreciate maybe maybe model to does the some committing and a that seem dynamic strategic built from IoT. do of to contrast to of it what talking as kind PLM backdrop things have is complex are or about question a to a everyone. I investments can withstand this thanks. obviously you your

that of just so And scope is than in kind been different it of conversation has past? the

I the helping Keep and Yes. Jim by plan We're products. to not in and customers product. not Joe, the is mean absolutely helping much mind engineer and that production produce them for helping large them really processes actually here. PTC to plan we're

And you the planning that product because be are the next-generation next problem problems. you're competing solved products production you'll as hope has the if some generation for suddenly So don't chain really to a reason problems, who production the at point. problems stop I companies of And will take supply year didn't off. and then most be see a production having best

connection And didn't any either connection. that in in see don't frankly, really particular we way. much we XXXX So see

a record work think for the pandemic without digital just doesn't put XXXX, data. I system a of work. in for execute So It into for us a product hybrid momentum lot example, People realize of can't you transformation.

and come people idle ahead advance stuff. to harnesses with strategies digital that CAD initiative So of through factories that some Ukraine because from their their cases and in to example implement forging on to they're used type for momentum if transformation carrying are are all even semiconductors PLM wire is and that their waiting or

of in Germany, that net a churn the in Europe. just was in customers to Russia I we week for it PTC quarter. mentioned the it's were And actually project. quarter related It's of in So of I'm like to a from in ahead the had as last point I a talked bookings that's And fairly Europe. full again And that all the speed you put material. probably strong growth if Europe very we

of well actually think numbers. feel still And I pretty time doing flow growth like we're a lot deliver impressive sort at some we good. cash conditions same and and free the can withstand So and look really

be just conversations. a peers chance you transition great. Okay. That's follow-up the It announced to lot on that as to had have Windchill are how of like just publicly your One have evolving up migration SaaS a your now to seems things approach getting could the inkling six to point for play that out you're onwards? Windchill about their efforts of if specifically wondering accelerated recently. dedicated this said you're PTC I'm one as own that have just kind talking might cloud

Yes.

you part we started really feel If to project. Investor phase And phase. of starting the it Windchill back our that first Day back go I'll like we're the SaaS the remind third our you of in

of And cloud. it's we've drivers has a over growth success one It us for the the So of last for with quarters. XX had lot been Windchill.

didn't of Windchill the cloud do we like the difference used cloud of think we the it. I part business is, profitability to the as

different doesn't which quite much to is a different. multi-tenant the So of shift the in to quite it outcome and profitability. a PTC our this to produces Windchill+ different look really But bit looks model, customer terms

in because They now. So, I Windchill floodgates think, us the a that's cloud still likes Windchill the causing customers because the more open like to And now. cloud, PTC like a the Windchill business in the cloud it's in before. us better little for more, attractive

Thank Great. much. you very

question. Next

Stifel. question Borg with ahead. Please next Adam go Our

Hello, Adam.

well talked the Maybe just cross-selling the and today update love to your a thinking last on slide you the just about you're terms what core -- focus the of as remind taking and again. installed and of AR, customers talked the kind quarter as ARR? it what upselling I here of you upsells Thanks, CAD even deck and about Hey, so on for guys. synergies IoT for going Thanks in on an in base. PTC's with just IoT continued question. much combining about and cross-sells, forward us PLM and strategy

key The -- the because there's is manufacture. cases it's -- key is connected One use IoT Yes. are actually. smart two key for I much key products, thing larger. you products on thing mean, mostly three the let's use IoT, which focus cases

forth. and users factories. you anyway, one a this products That's from so that smart information it, one the Navigate in manufacturers call buy an we second or strategy is kind bringing productive operations. is, third connected just produce the smart of, and of The and lot really And factories. But in lightweight all they discrete different factories systems, environment our of products more of your operate all operate makes then connected

all than with stuff, said reasons on to customer base is, to really success efficiency veracity and our anybody. reasons, selling more we we focus for selling just that what to So ought

And sold starting so to focus something That's we Rockwell particularly in customer place Rockwell came think the And good. we're cross-sell. a all put stronger really And Richardson there's shoots, base through on but let's base, sold Troy the in green say, PTC. deals the from in DPM, we some, see there.

So, in QX keep there's things in mind, want and when we think about of QX, a I point IoT AR couple out. to and

ARR rolling all of metric. is four-quarter First a

are that of QX to that already already two So four say four in. the going what's data going happen in. the in points what's And QX three of happen are in points to data say

-- what on the churn ARR. some have we bookings deferred of and or it is, So hinges backlog But visibility. rest what now, we

looking And estimate all so, crystal the at We ball. we the to we have forecast. look we're bookings. at this And stuff. at We look a don't try pipeline,

and we're year. on think we anyway, we're two at. confident will we're read what the us looking But have right. going the we And what handle churn be not And by of that's sometimes get perfectly that that's to a that to end

well just are follow-up. maybe a And the Rockwell as DPM again. the we the and hear It's just to state great. partnership quick Maybe the two seeing just there. of some success success Thanks, That's very early overall. on on Rockwell great on as seconds union where with and on

leaning And ThingWorx and -- is and truth arm Yes. Calypso the a Chief I as talked happened and Well, Rockwell is PTC PTC we better IoT is, than fit is him with And lunch so, leaning DPM in a coincidentally for an today, really the Genereux, is at in. consulting Rockwell Officer is from it Scott in their Revenue platform, Rockwell to leaning platform. so be had over.

I better you Rockwell there's success. gives see us of. green DPM foundation, It's better So solution will were are for versus We We're right I PTC think capable some platform. to participate both both and promising the it shoots a fit providers. if a pleased in a Rockwell from solution success is there. This what a think, again build to start. And

Excellent. Thanks again.

go from Griffin Securities. come Our next Vleeschhouwer ahead. question with will Please Jay

Hi Jay.

that you as acquisition acquisition, rationales XX you that you ultimately addressable from of the market small contrast Kristian the spoke when ago part Jim, you at acquisition the compared could of Jim, you? the a day almost how MKS, Intland Hi, and became are relatively with starting the business. years with bought which on rationale for a

different in strategy. ITC transaction, arms say the makes of effects Intland, net of the then now add compelling when the out a genuinely the you fiscal minus terms your overall you an year? year what's the that and management in the the the let's context secondly And from Kristian life perhaps restructuring think particularly lands headcount headcount ultimately field, put with the of do race you the it at of ALM back by cycle of end closed-loop fiscal end the in where So Intland for service

solution well. That's system, one We Number have versus PLM a thing. We SaaS technology. had versus therefore it next-generation of mind that is our Keep Integrity. And COVID product fundamentally Jay path with means didn't fuels couple out. business a had stand think the Okay. fixed our reasonable a But SaaS. challenges it of I'll we've think with at Codebeamer ALM is subsystem a to mean both it's But didn't I when key a SaaS one Integrity look some are Integrity offering. PLM as same take I the the have with I Integrity solution. this I Intland first the integrity. that we a is by which itself story. much things success older success product. that and one on in there's in It's

entire had like against to has management community built-in the The code own shifted tools. things so GitHub, very, to GitHub like forth. development second source things other which be tools very its thing and It's is sell And Integrity hard amongst really tend free. to

modern out a to stuff. is experience all the it sexy, designed as And that the there. really all with viewed So kind user that of is thing turns other Codebeamer is tools these then best-in-class out third work Codebeamer

an an competition the ahead or Codebeamer where companies, offering the aerospace to leapfrogging is offense, the setting automotive we safety of and people go inning now back were I and you companies, defense device is into the on automobile ago back said context we software us leapfrogging back that with XX into have far the with and would what products. The really companies, allows Integrity, medical years this we're very regulated thing software critical put of manage to carefully automobile. in got where in into have So

as bunch every a a systems, those part. them a software. but requirements into of get worse in and bad get set automobile. of implemented requirements a failure mechanical than the software Many even mechanical And implemented of a or day have bug into a You new is in for more

there's and And then automotive changes it of so the this supply around anybody says deep these code. if line that regulations concern companies in the by chain

code which know, line to of need they change. You

a You changed need they to have know it test need to and break you they anything. didn't why approved

a And company very, any don't mechanical like software management very parts. so frankly to apply PTC. doesn't difficult environment software it's We a that have

software CAD they're back but and physical needs So the that it's be together. just product software, us, PLM all and integrated a in in a it's to managed context of

move Intland strategies. our a and leapfrog ALM within Kristian? next-generation PLM is basically So

Hey, Yes. Jay.

say it's obviously all probably moving we're and somewhere X,XXX precisely, I'd range. but difficult parts the the pinpoint to Given in

Okay.

So fiscal headcount of would but being on revenue. the probably end year, net of end larger up the flat a base by

flat year-over-year? Should be mean you do --

revenue. you right. you'll be a bigger XXXX so Right, Because of ended X,XXX, terms but you at where that's in think end fiscal you'll company up,

the If X,XXX to like in And trying see pragmatic. we'd somewhat hiring we I'm to environment. right. also mean that's I to I'm Yes, just X,XXX. possible be trying factor say to challenging could that

Right.

you positions have open lot of Jay, we know a I on Yes. look you data, at hand. one mean, this

attrition some employees have through then on out spending and another transaction. we're hand this We

reasonable context hiring success. a pin down probably flattish. be it But pin is it's mean, up it I all down net those will to little go of out, headcount here as So in hard and because the a dramatically difficult that, approximation. won't to attrition

Okay. Great. Thank you, both.

go Our Yun Capital. come Loop Please from next question will with Kim ahead.

you. Thank Great.

Hey, Yun.

-- hey, Jim Hey. Jim.

you years. amount kind services expect partner with professional your the - transaction market state the and for adoption capacity? investments deployment business ecosystem advantage transaction and lift out overall, opportunity the beyond the have comfortable the and making offloading given But any demand several can to whatnot the and potential are announced to your ITC You implementation expect years? IT you And meet of professional the feel increase have you labor just of if that around adoption Obviously, do the revisit of Windchill+ as enough over that the some that. several services and of if tight that And of the today? of you this over you work partners professional next you taking you ship around part to there, illustrate services Windchill+ you're capacity next that

Yes.

of ecosystem. little we So for But in tremendous let's clock have benefit turn scalability just a bit. the the everybody, back I think

years chasing go And XX going back And said, third about services. those happened it's in know, successful, X% transaction. services. let's our or our X% over this you as what a of we was now which If years I result of to, quest don't revenue stop was so for very a margins,

that Let's give differential from times XX the added and it us on to The own. ecosystem. ecosystem their took that

and stuff. So literally and firms dollars the of Accenture Cognos, is names like of and and billions them of. many many It's not heard you of having on ecosystem our and Calypso With never services and not Cognizant one having smaller Deloitte doing on and partners. around a It's on some partner. many, many, Cognos in

carefully. we're lot So very capacity thing a the our just can't partner, to out has these running be The of systems projects there. It system. to because is a the taking we give in end done there's into

with our work many tend because these than of projects really margins could even We to many, projects do for ITCI, to said, margin there's have employees, ITCI. have I in have to years there. don't We subcontracted projects two subcontracted course, subcontracted that P&L, our but want I less we own

ITCI build hire That's services this fundamentally than way, because By the happy arrangement. go the great all to business. didn't the business in. It's really win-win-win. just they're business, a to grow want is up people, they're an So those we rather entered a we company. subcontracting Indian into

their services a in access best these we're of projects industry a us the give lower-cost end to And own will Indian have DxP India and reservoir because they are done seeding deep up – in with the in labor So with lot PTC's will it being which employees. the that talent, of India capacity.

let's is and have joint subcontracting good venture We that to that, what like and new know, a have said, to ship just something software, high this margin, you want software PTC way that DxP or a be approach. So high-growth could pave problem. We a service been lift on company. been could to we're focus solve a

And then your is I Jim in of adoption Great. quarters question, what think of asked Okay. next adoption? Windchill+ the least yet, the regarding terms anybody but at pace the over just several a quick the expectation – don't the

we've offering. Well, lot in a cloud the doing phase of one been adoption Windchill that of

bunch our now. that engine, pivot single in our benefits just the a our we're workflow to the in sign-in capabilities. way, cloud the engine, of Windchill+ so It's cloud. all things So the across is by plus going cloud Windchill+ suite the plus not Windchill Atlas Windchill+ visualization plus just plus BPM plus to workflow

higher trying it to but to to price really in to differentiated part more cloud. the also justify we're attractive the So go make to point, offering create a help

Just for but a I like coach wouldn't have want me? bigger seat. a people a versus first we're It's cloud have seat It's a food. bigger then I for my saying well, of to say, at price is system tell into a Windchill of the lower class I It a somebody offering bundle bigger. point. a bigger to system coach a think fun like things. isn't better airplane integrator So TV, what doing an seat you in could seat. in of put it's want just That's at sort seats sit And

first. board to get You

seat restroom. room with Chinese all that of I for those off plenty a can't luggage, your be You be a menu. mean, unbundled got and the bought associated to access quicker first-class stuff and would

the to really the going same of doing then with the strategy that's products we're as follow we're Windchill+ rest what So and we're with ready.

Okay. so Great. much. Thank you

Thank Yun. Yeah. you,

will come Please Celino KeyBanc. next ahead. question go Our with from Jason

When in. areas about that make PLM need for may no CAD over last me think main years, the What influence PTC fitting segments upgrade or few in for I for we've for for seen to Shape acquisitions we SaaS? other buy on Thanks saw arena Great. SaaS ALM. the via PTC's and

stuff. Well, that's a when that a kind find all of we company do difference things you keep being in and and mind, to between there's profitable opportunistic really have great

basis IoT covered. of about AR are AR. stuff half as SaaS is sorry of main IoT of quite savvy. and is sold half than And half I'm and half PLM About the and that, already is -- CAD think as then I SaaS of AR more and sold more our than of

announced time on ago. available might You the some we capabilities the remember, Atlas AR platform

bring we that I Intland we strong the in in, So to have gaping And – it company. think It's wanted for that And in important us acquire no we cash I neutral, It's long-term works last holes. think was disruptive think and highly the would free to there's market. free need don't mid integrity such accretive fill. bought weren't flow allows way, which kind cash of Probably fast, short-term I it's don't profitable. if hole flow growing and anything, it us. a a to

about think time we its how more that's strategic So, we get to go should it, next? opposed something, opportunistic to as and acquire what

take for question final And Savannah, our we'll today.

Please Securities. Mizuho Broome our question with go will ahead. And final from Matt come

Matt. Hey,

Matt. Hey,

so SaaS for sort Thanks expanding Plus arena following question. that me become Kristian. thanks and up is does tape globally. Jim going easier guess Hey, now where to reseller are more activity that go-to-market here. your terms now and mainstream, of of that -- a of And sort you Windchill I speak is across in channel

Yeah. Well, be is most sold of direct, with say sales that first Arena an frank, inside model. to me let

us. for outside big a not there's So

what if is kind probably been far with you work. thing big great really so this We've some to sales so require largely of to But particular PLM's, to Arena globalize a complex And to that get with inside scale touch drive inside model. PLM we can model are able model. expanding and success systems Arena a is model. higher been we've inside it An So good.

And really we're so what doing. that's

market -- higher can it. low interested point yes if And it's process. Arena I be to inside a that our selling a have with Onshape. a existing some resellers selling sales a at the role complex, model it's will Now, need to is think Arena deals make there'll and probably and great in And work. But working as our more model resellers it thing now, play goes a up are and great touch you bigger get right for touch

far like And so sounds be might it to. able we

Perfect. Thanks very much.

Okay.

on think very spending question me, here So we're our some for Matt, days. I'm active And the Matt time others. circuit We're Matt with I a last to be will going conferences. thank here going tells be right? all that dozen today. you and a XX few at next half was going us in at the Kristian like be to different myself and to

a so So long not, we might road seen of would a the if haven't hope and in nice again I on see see you you It days. to forward I be you to face-to-face. we'll to lot in time. talking And XX look you

to combination resilience given particularly profitability, growth the bad. strong As you strategic We've our in and in are bodes for can good working in that a mostly really good see business. that's and feel moves. They're put and the put we a and well of profitability model place moves lot We've of it pretty strong well good us, times in about place have working.

days. forward the and leave XX look I'll seeing sometime to So, that with you thought in Bye-bye. you next

everybody. Thanks

disconnect. you you concludes may today's for now your that participation call. And Thank and