PTC (PTC) 1 Feb 232023 Q1 Earnings call transcript

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the PTC 2023 First Quarter Conference Call.

During today’s presentation, all parties will be in a listen-only mode.

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. ahead. go Please

you, XXXX Thank welcome PTC's to Good call. Rob quarter conference first afternoon. and

On are DiTullio, call Chief Digital the today Group. Financial Kristian Executive Thread Officer; Talvitie, Officer; and Mike President our Jim of Heppelmann, Chief

through Today's and audio will available a broadcast www.ptc.com. at call webcast later the an today conference of being call be is live replay

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

Securities that information concerning statements as well cause Additional PTC's XX-K, with differ to press and materially today's found in US and be those factors Annual forward-looking Exchange could the Commission XX-Q actual on Form filings Form results as in Report release. in from other can the

statements only valid and update The call provided X as assumes of guidance these no forward-looking this XXXX date, obligation to February statements. PTC during are including forward-looking today's

call, on non-GAAP the principles. will discuss accordance the release found reconciliation generally GAAP in accepted can the directly measures These prepared available not today's comparable non-GAAP financial in of most PTC made non-GAAP A measures accounting are our be to website. with During measures financial press measures.

to that, Executive Officer, over With Jim like turn to I'd Heppelmann. call the PTC's Chief

afternoon, and Good us. thank everyone Matt. Thanks, you for joining

off quarter kick despite incremental macro some to report XXXX. softness, seeing Turning a slide that pleased delivered solid I'm to first to X. PTC fiscal

The broad-based at all high billion, of up geographies. end and more XX% On and the of came strength across was which our top-line metric was the above groups we year-over-year. $X.XXX product ARR range in than

across was interference. The geographies. groups Sorry about that, and strength all broad-based product little a

XX% contributing XX% as company XX% a with a inorganic implausible increasingly position the our narrow Organic outcome Codebeamer ARR feel with point the QX to strong to behind guidance full we that ARR solid to of growth original in XX% ARR has results year put become QX to was extra XX% that The us. XX% growth. then

of of up cash cash we as free flow raised by it is metric helpful to the ahead our free in flow had guidance impact $XXX and bottom-line Currency for guidance to million. little million to year delivered cash Switching full flow expected our $XX be XX% the QX, year-over-year. free year progresses. but We our incrementally

call. currency, remind cover will that On exchange the I'll foreign of of the the Kristian ongoing subject you fluctuations later effects in

discussion metrics. constant So to discussing focus my when results simplify things currency on I'll top-line

we the Turning flow headwind ServiceMax a to results nevertheless though slide close completed X. acquisition-related costs ServiceMax. the results in free strong acquisition our to QX is incur quarter not of included we Shortly we're first in that reported after our did some QX. cash we

going With now our be will closed the deal guidance included forward. in ServiceMax

this is this of life now highlights long matching the in spot customers recap Think has ServiceMax PTC, a factory at and a in To or to part business products. an sweet cycle This equipment tool like manage processes machine a of refinery. used PTC the we profile. MRI service have a a always pumping products as for high-value for hospital, machine been many of

logo with products form Referring this digital that are to exist know the managed point, part under in in Windchill. digital purely and which development. you represents Creo logo they a At refers X, interplay of on to diagram and is in way authored logo and digital The ServiceMax. our the fit when of to many the explain infinity PTC's slide that physical a of provides good

a That's order our customer. physical configuration is that factories which it order Being our use logo configurable. produce the product take to their and customers then get as digital purely the product, recipe this end physical are part fits the in. digital the the where highly delivered of the matches stage change at to of products data time and an easy Each to

different. Physical products are very

for you software. are Arbortext a in service them need parts. types using This factory to is If and information, want The when truck Spare to need customer technician and Servigistics the managed of example, product the change spare technician our Vuforia. to as you what to parts a will digital used access site information similar carrying product. dispatch created the creating

to High-value profit. keep and the service contracts service a provided sales years highly the source part or by and These running, and regular require even customer products for by this of them is who the operated spare are typically decades. products as desirable recurring up manufacturer, and views service revenue

the helps and activities. service service and lot value base ThingWorx entire base installed necessary orchestrates all ServiceMax manufacturer adds physical manage installed By because proactive preventative the a instances of of allows products, their more to ServiceMax the to nature. of it be monitoring product in

a truck roll. And be the canceling sometimes can thereby the service for done even need remotely

and see hand, orders catalogs synergy because on instructions. primary the source is improvements service And or Creo created process that process product the As service the the in service and the great ongoing the of product engineering ECOs. Windchill, has form hand you on parts ServiceMax with engineering through consumes of data can change digital feedback drives one in other

instances of digital configurations the actual system system of Windchill slightly and the all which the different of products of exist, definition product record for for ServiceMax may record the physical each of serves a configuration. have that serves as possible as

flowing is key digital diagram the both infinity life there throughout in these between a systems As information product thread directions product of the implies, cycle.

products, data the solution value. to the service lubricate important, Aligning knits as optimization. Equally this business SLM this. has comparable offer system ServiceMax of ServiceMax first for record, of allowing service our together tremendous existing creating offering a various PTC's truly No competitor to now comprehensive management will with offerings PTC flow industry's

spokes. of our as as solutions SLM PTC's You hub-and-spoke service a with ServiceMax and the think offering other model can new hub various as

dynamically information to and vital monitors product configuration enable remote each the to the in signs publishes of IoT service. service to products ThingWorx For connects installed base. technical installed match example, Arbortext preventative

Servigistics enables technicians while service more of inventory AR possible onto the this productive. information to service carrying to smallest met, product spare make be agreements installed And allows be Vuforia level parts. technical customer to service augmented each

the between acquisition various work ServiceMax and closed With to deeper underway enable offering. these now integration PTC is

SLM vision of our be we're the I'm pleased unveil will number Neil conference in of announce one will to based ARR. that that May. Neil PTC over million it on SLM expanded a and CEO preside the business of $XXX the Barua inquiries ServiceMax team combined joining and LiveWorx is this new to broad I now exceeds of highlights expect of the And at getting, conference.

as versa be service also fit expected we and growth well domain. offerings with cross-selling fit SLM too The can strategic flow is our part rate to PTC's the financial various and by is to engineering as service accretive about between the and The drove raises. cross-selling this excited transaction ServiceMax we're guidance PTC's excellent cash today's the to generate within excellent is and vice synergies the as of from

few high-teens than for opportunities but ServiceMax cross-sell The which synergistic also market. is the increases a market, see growth faster growing the realized. are PTC's business accelerate been total potential ServiceMax the in to has to addressable time mid-teens points over we as business

Turning X. to Slide

to efficient on for has highly did organizational that I rebalancing been of model PTC the did both reiterate the and elevated XXXX created we work expansion the all resource share at realignment PTC organizational management focus and Given end margin XXXX sustainable. that's fiscal investors in The driving. that have profitability program today's fiscal want we the fully market, during an

but se, downturn. for identified. When as problem we macro pursuing opportunities The changes, expansion we we now well-positioned took made were these per that addressing we proved simply prescient, not margin actions a a had we're

cost are structures, notable very terms thanks period with restructuring. come to of any our a layoffs uncertainty need announcing layoffs not tech to actions, anticipate cost companies we're structure and to of do entering for many we or While proactive lean this bloated

we've In operating noise, ago. expanded to doesn't sounds QX, compared but to magnitude due of improvements like That the progress, made. XX% ASC non-GAAP capture to a XX% fully XXX full it margin year

by called our of contribution metric but precise more metric, an now that same be we're a is to metric it the measure. the margin name more the on changing prefer assess operating call focusing operating cash efficiency We is to financial margin, metric previously progress we efficiency. Operating not we non-GAAP meaningful that a

of name The is our our billings basis taken, last ARR XXX approximately another points year. the change efficiency only. each the the guidance and year. already expect in still XXXX, still following convert we metric At to in expand flow is based point operating way much fiscal midpoint a this on improvement we continue actions range, by basis delivered XXX to how calculated to to cash same we're This of measures able

free The the layered free and QX guiding double-digit elaborate fiscal growth significant what XXXX. growth cash is operating to XX% efficiency we're improvement top the cash flow of on will what for is when drove flow result ARR further. Kristian will drive strong

Turning to seven. slide

aware, a signs the softer downturn. further of in start, we of incrementally potential our macro QX, bookings. you're guidance possibility downturn ARR FY has As the range, from contemplated XXXX form saw the In a of

growth year-over-year, strong reinforcing a by of softer rate, improved software X.X last the bookings of actually point rate to time, was sticky XX.X%. impact QX is. were slightly XX% growth from The and net the slowdown down we At just ARR which stronger renewals, taking how about renewals same percentage comforted these quarter's ARR about our

relatively and macro growth we issue. obviously that, guidance suggesting $X softness less was the was summary indeed, ARR of targets our posting related, well was the to financial ARR the had it positioned remain The high range. our of type results at end accordingly. than have against XX.X% business, is range, million This various QX, raised above after perform of any so QX rather we than dimensions guidance in landed The our across consistent allowed competitive

a QX as QX. raised, on XX% to original solid Turning to growth ARR narrower guidance, we're because in plausible fiscal our the behind with been given low that outcome With eight. range track within compared to end now slide now, XXXX, having deliver results XX% to less the XX% is us,

ServiceMax Kristian X,XXX in from ServiceMax on XX% guidance the happens portfolio Keep more of range, QX will few added that's new plus top. recalibrate addition a ARR essentially minutes here and points range our in of outline will to XX% inclusion ServiceMax the In basis to upward. the a growth mind,

the factors outcomes, rates. flow could a we Across this raise FX also quarter XX% involved by improve, flow here the progresses. for now cash prove strong million, $X roughly guidance acquisition foreign various original Kristian parts: from million QX, growth equal is year which provided benefit elaborate free represents to raised exchange ServiceMax Should The we've $XXX in ago by a helpful $XX ARR or year. improving of incrementally powered full exchange million and cash the further too. result hold, expected on the in the will rates the as range

Turning slide nine. to

Let's was ARR rate, year in all nature the ARR In growth XX%. QX was of look ARR given Americas APAC despite of still our the growth across in was Russia trailing XX%. at XX%, ARR ARR geographies. Europe, last exit the growth in affects the growth growth which metric.

Across driven all magnitude by in and demand continued strong largest products. Windchill was of the geographies, ARR CAD growth terms Creo PLM for

we the in APAC the US. which saw rates the delivered Onshape. outside growth. finally strong and Arena, IoT, expanding and in reality Europe percentage growth growth for Americas, augmented strongest and in was In growth APAC. the Servigistics both delivered rate ARR Onshape has and Arena, been percentage also And Arbortext Europe, and strong In highest Europe Windchill

Next of that Onshape QX product our Creo, driven in data, the we which growth Arbortext. in that performance supplemented strong in product at percentage X%. groups products on growth ARR the primarily delivered market was Within CAD, has by authoring enable XX. Slide XX% growth ARR by those been approximately growing In of a look let's and is this

was PLM, across PLM, includes growth but product retail QX PLM driven ALM to outperform was continue and with IoT regions. results we significantly approximately and products delivering great all data the to Half process also those growth. geographic percentage that orchestration or including growing been strong enable growth development, Codebeamer strong In rate by Arena, management which in has growth our by XX%. ARR our XX%, contributed for market, QX and PLM In QX organic which Windchill, XX% of

context the new discuss a logo on to like Windchill+ Slide customer I'd XX. in of

new SaaS transformation progress of I'm growth a up to pleased importance the see our the solution. driver, program good Given Windchill+ as ramping multi-tenant

pipeline. with logo While it's dozens across have opportunities we the more early new of shortly still about dozen in production or in as as Windchill+ well deals SaaS a now there a lift-and-shift customers combination headed conversions,

our And landed at benefits well company. our share of implementation a we far efficient said Investor deal enter offers. in to more needed faces we're to type of a that To be we short because This ramp to customer streamlined that but of a customer there'll multiple that that's be over example changes thereafter. Day, a thus with place organization of committed a we designing a quickly, Their tight order. line team in diet story, logo sports circuit, system they're power to offerings. an As prepared. to then for be a expectation. improvements tracking expect as S-curve an and PLM and tested PLM get new needs has racing And time Plus completed the Windchill+ unit a great usual well-known motor That's new experience reaping the years a steady

achieved them Windchill+ secure hybrid system. out-of-the-box keep a their SaaS team, across improving months, so integration with IT on of field PTC their leveraging team time focused has internal leveraging in production there several This by to the a is the company around racing, enable They preconfigured With delivered to the collaboration as members Windchill+ service. globe. ERP quickly the to SaaS while ramp-up capability so sports their of and no motor dedicated applications important customer including the efforts customer by got implementation

offerings a As follow the beyond. you'll iceberg premium and a and the reminder, Plus in Windchill+ tip Creo+ FY us of strategy, and similar is XXXX of SaaS with see bigger

and strategy the power at share technology. Plus like the to customer immense you in help Creo+ We to bigger our LiveWorx anecdote to I'd launch aiming May. better are another understand of

may from mid-December scientists for Livermore the a U.S. time more customers to first produced nuclear way of Turning want filled project it to Facility fusion with Lawrence National than future a have major tell This that our Slide energy pave generated Livermore's to scientific the XX, news Ignition about saw important I Department that at I happened trust Laboratory you and Lawrence National breakthrough reaction consumed. Energy. an at at the energy. you clean the

of and is the Creo and say likely, directs degrees components, nuclear power very is National millions a to NIF testament precision-engineered then The Windchill or is except XD reaction. and the technology. With area we all machine Ignition everything ignite onto enormous which generates of of beams system systems the stadium-sized bathrooms. NIF NIF The is in powerful a XXX modeled a and X.X assembly believe assembly to massive complexity. NIF million essentially Facility, the in real The the fusion ever they and ever walls of that that is pencil size eraser-sized laser to Windchill, a and modeled the heats sports made largest the our largest CAD, Creo machine

has challenged highly in mutually over beneficial what to proven have During enable relationship. PTC projects our been many our teams further a with regular collaborations such teams develop to products DOE years advanced product to now, be

the And role PTC announcement breakthrough. breakthrough. a been ultimate me. may early was very the played to of demonstrated that the fusion the as While in very more who for lies effort role enabling well-prove in including employees work of exciting this potential have we're in NIF, harness ESG by ahead enabling energy PTC to involved the key play technology the many our proud has substantially

Summarizing on then slide XX.

a signs lot we now. While macro in saw going QX, right of slowdown incremental a way there's our

in market organic established another at We digital peers. which growth well-ahead of the category transformation First, just has technology industrial clear companies. posted become itself quarter PLM of a must-have backbone XX% PTC has as leader PLM, for

the PLM market. are We conquering

start. interconnected unique and free life portfolio the of product a ServiceMax to extends The big addition and across flow PLM cycle is efforts. further provide tailwind what thread capabilities full was and already be ServiceMax the a to to Codebeamer ServiceMax right our cash a expected digital conquest of ARR boost will Both from

already, multiyear at on-premise executing days is against a that the Second, major we're double-digit growth transformation level a tailwind. should to a SaaS company growth the early in well while but provide

back a a cash we year. growth changes of and expansion than margin we've this are levels for the reputation driving flow decade free goes Third, made already that high more driving have proactive again

business is PTC bottom to profitability year. are is at this in double-digit line Fourth, our companies XX% we're resilient. growth line the industry growth are model that our and Top that peer many the peer very group. that line demonstrating line best projecting amongst levels organic top Not guiding bottom are and

that happy team expertise the the team Neil and the depth because a Barua by and ranks here that's executive passion entire led the same we're for to We're important in business share to growth expansion. deep and finally, welcome Neil drive margin the proven and has to And PTC ServiceMax culture. PTC ability so

believe been in going shareholder continue has to a With opportunity create so the to a all macro tremendous of expecting. positive many way, I our trends even we've downturn PTC value face

that, With on detailed it his Kristian and commentary financial guidance. for over results turn I'll to more

Thanks, good Jim, everyone. afternoon, and

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

constant Turning up XXXX XX. exceeded guidance. to Codebeamer, year-over-year an XX% currency $X.X was year-over-year. excluding organic was On $X.XX up and ARR billion, slide our In billion, currency constant our basis ARR XX% QX

against the strong our line explained have. QX we that improve Jim in As and well position to top our was we're continuing market strength We're broad-based. strategy executing upon

than due of positive businesses On Currency an XXXX constant our ARR of continued growth basis and as solid ARR. were in XX% headwinds. SaaS well. XX% growth, higher was our fluctuations saw delivered reported as QX to impact $XX organic FX in ARR as-reported Our we QX million currency ARR the

headwind. currency basis still were year-over-year a a on meaningful fluctuations However,

Moving to flow. on cash

metrics. our with strong ahead in of coming Our guidance across QX results were all

to there impact to cash no movements during great flow FX from QX, see While it was FX. free favorable was

Our discipline. flow strong a in free on of by cost foundation QX performance solid was and based cash driven execution collections

Our $XX in cash also to cash million, ahead expenditures $X guidance due of guidance came compared of by million of our were which free flow outperformance million. and from $X capital operations a timing the combination QX, in of to

it's a When is in cash collections our things. year. assessing on few quarter. And lowest basis, The the of revenue. our and generation flow half than ARR, forecasting is first cash majority our primarily occur remember to QX flow fiscal important our of free function cash flow, of annual an a rather

$XXX year-over-year currency basis. up year-over-year million, X% recurring QX million $XX constant revenue QX In X% grew revenue on million revenue and license year-over-year. million and services of by professional $X by a perpetual was $X increased revenue by grew declined

strategy Windchill+ The our some professional lift-and-shift professional for decline services revenue consistent revenue our of our talent DxP and with partner to in is transition to services projects.

rather discussed believe guide do cash you that previously, our understand performance top to XXX, impacted by generation. line indicator we the ASC revenue metric ARR best the revenue we've as business underlying is is to our so not but best we'd performance, of and As

Before move our XXXX provide quarter. like on to color QX Compared our in last balance some to operating QX on margin, I expanded XXXX. non-GAAP XX% non-GAAP I'd to, I did points as XXX by of approximately operating to sheet, basis the margin

XXXX. gross we've operating benefiting because from and that we're that done to such other as all impacted in continue revenue worth mentioning, fiscal caution profit derivative optimize to margin, by the ASC work impacted our as well. cost We XXX structure are that is EPS margin, it's Still, operating metrics

QX, spending ARR free continue year-over-year to top flow. our we higher and our basis rate On than cash delivered faster line significantly at in a and grow a

the million. ended quarter to and XX, Moving $XXX cash of we equivalents with first cash slide

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

ServiceMax of $XXX increased in acquisition, from billion. conjunction term took $X.XX and billion forward, revolving we loan in $X QX, a million size our to out facility the the credit Looking with

the on The the QX, of million loan net term the of in should borrowings at and notes, down $XXX us and end $X new drawn revolver leave debt with in approximately pay million high-yield the quarter. billion $XXX

this payment As payment credit balance intend is debt-to-EBITDA million. we XXXX our October a hand to on with facility. This debt fund and our cash revolving included on a in is and the transaction, ratio. for of deferred second our ServiceMax have reminder, sheet We due factored also in $XXX into

into ratio pay the XXXX, times by debt-to-EBITDA QX. X.X fiscal throughout be We be end approximately should we expect at QX three to We fiscal debt. times, our continue levered three and XXXX around as to down times below of and

with $XX as relates approximately you help $XXX it interest XXXX it as interest expect your models, the million. fiscal flow, we To million. to And cash relates expect of to total P&L, approximately in we cash of expense payments

to paying down Given increase count XXXX we share our XXXX, environment, our and shares. by debt share pause, expect rate one million fiscal And little the our in diluted interest fiscal expect in program. XXXX. prioritize we a repurchase We'll under, to

the to substantially and reduced XXXX revisit the debt expect paydown of share We have we'll debt prioritization and of then our end fiscal repurchases. by

goal long-term ratio debt-to-EBITDA cash free share our strategic interest flow interruption, assuming is this into to rate to return our the taking while consideration and Despite below opportunities. our of remains also XX% environment repurchases, approximately times, shareholders three via

shows XX XX, rates all on of constant the by our section we product to FX slide, slide group. September top In used the for Next calculate currency the periods. ARR of XXXX as half ARR

our as-reported the ARR dynamics over differences on the see slide, and have constant between currency resulted in ARR can five currency quarters. You how past

by XXXX guidance guidance our $XX to be higher of $XX the XXXX and compared to materially to as-reported constant on currency of ARR currency move by between million million be fiscal currency results. continued end in ARR our ARR results as-reported of a QX difference the Based exchange causing rates QX the XXXX, in constant approximately would as-reported approximately and our midpoint ARR higher midpoint. Exchange QX compared XXXX our constant would at rates,

to results QX would constant also guidance actuals. QX rates that, But We end on we exchange our If impact a can change. and material on end FX obviously currency of fluctuations the constant and basis. as-reported actual ARR a ARR of XXXX significantly the the provide report remember have fluctuate and currency both between in impact

business, the the way our it or best believe performance the positive currency top currency to line is removes of negative. evaluate We because analysis, fluctuations constant from

moves provide recently, seen that, thumb we've updated sensitivity XX. slide sharp an of it the be useful on would Given to I rule ARR thought

addition more other and In transact we dollar, additional than to US yen in currencies. the XX euro,

change at the would $XX again QX, rates the end currency negative, USD-to-yen change the million million rate Using a the the positive course, euro-to-USD impact ARR be the or in $X.XX would the size impact the base. of a dependent or estimated impact of be on dollar negative. positive rate in of And of and ¥XX $X to ARR is of

take XX. that, I'll With through on our you slide guidance

For Day FX rates this shown is amounts, our XX, ServiceMax. slide November XXXX. includes as and from ARR guidance Investor using we're our guidance The of September previous presentation, XXXX on

For range fiscal to currency billion. of range of currency constant on $X.XX factors. constant growth we primary $X.XX guidance which XXXX a XX%, two to based fiscal XXXX, ARR billion to corresponds expect ARR XX% narrowed This is

ServiceMax. XX% to up took on guidance range of QX earnings which the provided we excluded we our bottom XX% end call, the First,

incremental we While potential for partially the XXXX $X million QX of in we much some offset we booking softness saw was and bigger ARR the than guidance by contemplated quarter, high churn our better-than-planned actually impact a this finished macro-driven saw, end guidance above and what our our range. first

the which macro range, continued year, and of due feel allows results we up for while still the end for our on of environment. based the still environment, the the strong mindful macro to So forecast comfortable lower being softening QX taking

Day approximately to million. $XXX we're million approximately for adding ServiceMax other which guidance few for include. this, our $XXX update which is was There's doing a reasons compared assumption, the Secondly, Investor to

First, month ours. ServiceMax' fiscal than later one ended quarters

the a quarter company know, software a the happens. month of really all when we As final in is magic

ultimately I I a selling results and few will to think behavior. to think customer quarters buying assume stick, align also it it's PTC's while their that with take may hockey align quarter-end So, prudent

or concern a as know a this in its account our not may want for ServiceMax which coming the XXX know Second, go-to-market fairly do impact in sizable we while a ServiceMax for announced months, guidance. Asset Salesforce.com in feel how we force. we to you is product. just Salesforce if it's with And partner business valid reduction

well. ServiceMax uncertainty the frankly, applies third, to environment And as macro of the

So, three to and it's XX% XXXX for for these million our primarily XX% $XXX now derisking updated ServiceMax adding the that fiscal to guidance reasons range. guidance we're

and fiscal QX a believe and strong our pipeline we've behind XXXX given well-positioned our we forecast to ranges, us ARR achieve guidance. we're set how our With and guidance

expect we that's to become And lower than churn XXXX. ARR was QX QX a In in than was terms, fiscal ARR QX and that more lower in XXXX Note base deferred ARR. was in modestly in fiscal XXXX our dollar it than XXXX actually in churn planned. against bigger of

QX, guiding to next on range slide. the we're be equates the detail of At in $X.XX currency to constant this ARR to For billion. growth. XX% currency more our constant midpoint, billion in $X.XX I'll discuss QX the guidance

our now million operations free $XXX million, raised flows from expect flow of cash for XXXX, up approximately XX%; We cash cash up we XX%. of guidance. fiscal and $XXX On approximately approximately

from cash increase $XXX our the we our to Investor the from communicated quarter a ServiceMax strong flow million Day, the our updated free at provided Compared results an QX, we and as execution million well which ago, the guidance already year. target FX acquisition $X factors for tailwinds in for in remainder as of

Assuming free past year the at be of our similar years. target, approximately full in we'll target two we QX our cash XX% flow hit

operations CapEx assumption is cash from relative guiding million. $XXX Our million, to free of $XXX our flow XXXX Therefore for cash to million. guidance we're of $XX fiscal

free approximately to of we're million. guiding flow $XXX QX, For cash

million million. cash QX $X approximately CapEx expect and in our from We therefore, approximately $XXX of operations is guidance

similar lowest cash results in we cash the and of in flow of XXXX, year flow of fiscal XXXX quarters QX and flow quarter. XXXX fiscal the model to half the of full year keep cash our quarterly mind, expect over XX% generation as you As first with pattern the in being follow fiscal distribution a

Moving we revenue we primarily raised guidance, ServiceMax raised November on guidance, Xnd currency. of because to and which -- from our

XX%. to billion XXXX, to of billion $X.XX rate revenue to we growth fiscal which For $X.XX a X% corresponds expect of

difficult fairly subscription predict to hence revenue range. makes wide XXX the for the on-premise ASC short-term in companies,

we ARR customers importantly, does of bill not or term as More upfront influence annually cash generation regardless revenue typically lengths.

XX. to Turning slide

ARR Here for currency illustrative is an QX constant model XXXX.

our results the range. constant nine is our the and past our see seasonality, guidance of XXXX. far-right quarters the relevant most over the see QX currency to ARR in Because can tends midpoint some QX compare You we've of ARR column, modeled

to is said which million, that of need midpoint ServiceMax reasonable we $XXX guidance XXXX The a is believe at of QX of our $X.X illustrative range model Investor what target. ARR billion, indicates, hit the and we Day approximately

On sequential prudently. the quarters. top our we QX, This than the in XXXX. to million we've of QX guidance hit basis. ServiceMax fiscal of organic ARR need we've for need less added ARR we $XX midpoint growth on of In XXXX constant lower is the million million end X% guidance over set percentage $XX our add of is believe at past sequential contribution, terms, $XX QX what we a considered, All nine the delivered which range to currency ARR things we organic

by we From supportive companies expect my I'll a for prepared companies. at we tends top XX. to line line of resilient so a be to industrial backdrop. And in R&D, a perspective, conclude face and serve prepared quite have be remarks Slide highlighting, we're resilient, that to one. today product Turning top storm the those

business very sticky We subscription customers. our model with are products our a also have and

cost battened perspective, we've hatches. Just as already importantly the down a from

have we've year, into QX. work hires to to when view Pollyanna-type did backfills the past, last in macro a head already addition, said we've as the as Nevertheless, slowed optimization don't we the planned it and we comes In situation. we cost

our to our of if cash fiscal meaningfully you on to expect the record with spending macro track align and can moderate further, management. gets realities disciplined us mitigate strong better And results. impact market a the situation spending have We flow worse, XXXX operational

example, For magnitude depending and more would the cautious compensation adjust. variable And et automatically spend we on also be downturn, incrementally would cetera. hiring on the travel, of marketing

for continues, generation. to aggressively other have the scenario, more optionality weakness the cash would macro the would invest if favorable we and/or improves hand, in our the in this if that dollar situation On business. our And be

one solid contemplated quarter market to continue environment and strong attractive hard management. to fiscal strong and quarter with our are of producing macro on the financial predict. that completed fiscal we've question XXXX XXXX based prudent no coupled is -- Nevertheless, and execution position one of There's results, positioned product financial strong

the over to to begin turn Q&A. that, the I'll With call operator

your And Matt of from Capital from question line the RBC Markets. first Hedberg Instructions] [Operator comes

Your line is open.

year taking for and of your with a on ago? resulted you think ratio the SaaS the Thanks guys. you sort guys CAD to Great, a a I do obviously, strong my great. which pipeline Plus envelope guys. question. for peers pushing in are accelerate beyond we replacements coverage talk Congrats think And the that guess for maybe two-point than opportunity PLM many as do Jim, results that's is strategy, question, you larger could well?

see level right so But at quite Yes. been they've there. about and they the at they're is the at I strategy have a first when customers SaaS, is Well, they everybody on-premise, Plus PTC SaaS learn high. to to you mean, come to the come interested. say, interested. to of helpful twice to of SaaS phase interest are all the been also I We're LiveWorx, certainly where if you here lots had think that let's factor size in pipeline, away because you're going because going come, have come would I'd in deals as just say, is

how sooner will their about wants bite future. but to people everybody hear into thinking about others, plays start Some it it and it, than understand

competitors of that some competitive a Then with think SaaS doing way. on laggards the hokey SaaS in do they're replacement I are pretty or opportunity, our

have on. and that's the in buy into right And collapses because strategy. companies the day to when between lot become I to a host turn say, bit a you And me cold." think like we place I French they really hyperscaler. think with them by it around trying strategy competitor, going of to And I'm hardware a "I it out an who that little all don't For you to order example, the is want a don't actually a are

to vendor So PTC, Windchill, think honest-to-god should doesn't to to going If like have "We available proven I Creo my products example in our do need Onshape story, Microsoft we slate, want pure XXX. an clean unlike Office have in other products hand, go industry. SaaS. full I not around." form good you people SaaS are that if true have SaaS, the and on And well Arena, start the then from to shop And will bore, be for a which that mature we the say, SaaS-est right are go and at entire

we're said, vendors a ahead way And people think serious to moving switching as there some out strategy. get and at you do of time. well-thought-out pretty same the amount we're people with I So of going SaaS to

Thanks, Jim. Congrats.

from next comes the Matt question of Securities. from Your Mizuho Broome line

line Your open. is

Thanks and Kristian. Jim very much. Hi,

Matt. Hi,

the impacted I guess how there? resources is growth firstly the ThingWorx during of at reallocation it Has just all quarter? by been

of bottom to steady. helpful cash we ThingWorx pretty fall instead and hiring doubt moved was that growth, ThingWorx very helpful to No actually around reallocation but helpful think standalone that PTC actually PTC flow, it's that been resources I the very, new would to line. because just isn't flow, consume and let of cash quite to resources growth growth resources

think helpful clipping So to very helpful decent ThingWorx a rate altogether of I growth growth probably ThingWorx, very PTC helpful altogether is but to although neutral at flow. cash along not to to kind

to what lag your growth guess of that direct if And line talk channel is I continues could why sort into done basis, direct AR currency bit with ask a in a partners? with Great. your slower more about just Okay. constant business? also channel you on I be might bring little can growth And to the

more companies And are small so think they if they're faster to When downturn, I by was weather have growing Well, conservative. than capacity less our the was the a will less simply impacted macro you room channel direct. I more think situation. strong economy

small the a I first is medium So our businesses, what in channel spending. downturn they're on which cover start think situation, conservative getting and to ones

that. And we've I mean seen

for and not of companies hiring. I start-up need aren't the And don't if hiring lot example, forth. so a expansions they're they think

sensitive the force. sales attribute is direct macro channel would relatively that more than the I So

goes the it the on rebound Now other way of course.

Right. Makes sense.

and the on congrats Thanks, Okay. results. again

Thank you.

comes Citi. the of Tyler Your Radke next question from from line

line Your is open.

Tyler. Hey,

evening, evening, Hey, hey, Good good Kristian. Jim.

So just commentary. a on the question bookings

the during So of bookings full ARR for kind the pre-ServiceMax. the obviously, where you was think growth say to year quarter for for base underlying is bookings? did assumption When get bookings to your kind last your year-over-year quarter? weaken, of XX% you flattish case saw bookings on negative that go And I full year

what lot is so ARR describe how And the we bookings about because how you a and key Tyler, is ARR affect to thought transparency to owe we the really where in macro to any bookings softer was Yes, little of what metric. shockingly frankly in because situation, align this And didn't churn quarter good. this. we're happened funny a was scenarios our and

happened we you So then decided we're what to what bookings because volatility what where if and really is you to is happened we we tell tell happened ought to churn you probably and ought we comps going maybe to tell bookings know year-over-year to exactly exactly deferred to as want you into to the get what is.

decided, So X.X we'll point it, we'll slowdown. we of quantify percentage as disclose it,

on $X math So about $X.XXX X.X can it's percentage the million billion. do point you

end took took but you. million more hit million to the $X it had guidance than the we XX% rate, $X in range what growth we maintain less to gave bookings what So than high of in bookings it a

at in So, four will show will the that way, the $X it compound million $X I quarters. up lost if it look that up quarters. won't next you in And now four the million and think show year we've but

it forward not question looks or us, decent. looks that's The little of quarters, bit good. than a the not. previous But business the And come does a an quarter. will I was it the forecast unknown. softer in post think real sort while as actually pipeline be, to pretty QX we was rates, two The look bad

Thank of just maybe what And it so talk the you're of rates you're seeing competition, just from market. to taking product in just strength the on basis are broader above questions the as the back you'd a a you growth do follow-up, and you're clear. SaaS. you to PLM organic Can an super perspective than seeing going And posting you. maybe about anything That's you're one obviously from more highlight? Who kind share broadly? see on relates

negative PLM think interesting be But you, it to up will And has them materially the terms nothing view, our earnings bit year in passed of see now. share. last opening Siemens quarter. just quite share, numbers changed given a of up mean kind up and share, has the late, and share. in some remind Dassault of SAP of Oracle we're we quite the in we has given actually at report. given has I in a posting In growth given up Siemens because gap to next been up what's general Yes. happening. has

wouldn't report Siemens the little on quarter. have all is try number to our and you I to because they and going post encourage of I happening, disclosure. has it Siemens this I some to surprise tease so to rates parse much losing going negative front would to you're you’re it see of approaching structural changes a momentum. it don't XX% competitor be and toughest see and it's provide apart, a dig they lot it in But think out kind a when of think growth -- me us hard if They all theirs

you. Thank

JPMorgan. comes from question of Tusa next your Steve from line And the

Your line is open.

Hi, Steve.

taking Hey, questions. guys. Thanks for my

putting of tricky. bookings to last rate currency constant altogether. you currency having kind of math that kind it a I'm actually does Sorry, so said growth year-over-year guys growth mean quarter? bookings you covering What I I'm just constant this year-over-year. said trouble on what the of like kind for is low-single-digit that a and a you maybe But quarter was bit new little think

netted bookings. don't We strange to We a because, guide We Yes. again, bookings. we on out than more point. don't And to was it provide having detail, $X Steve, but I the the softer guidance stronger scenario of lot avoid as mean a disclose. guidance bookings, compared little for color. it report the we million on percentage don't to better scenarios, disclose X.X a flow and year about cash free out netted slowdown

Yes.

of were first the about at what how were guys half got in Okay, the that in then this with a coming year least all on here positive pretty cash just line even lastly decent in you or million. helpful. strong GAAP assuming around basis. it. talk a of capital kind bang That's overdrove hit you $XXX a at And is else with expecting? you of amount seasonally Receivables the Anything flow, free it big moving even kind working on

general, was expecting it collections with were we again Steve. mean in what line In performance. solid I think largely I

Yeah.

Okay.

a bit little little didn't need and of bit ARR with it. the our contains guidance a where like it’s Steve, buffer Yes, situation we

Thanks. Yes. the good result. on Congrats

you. Thank Great.

from line Barclays. comes of next from Your question the Saket Kalia

Your line is open.

Hello, Saket.

but on dig for Hey, Jim, just of sort -- into my softer get lower softer maybe to bookings love in the taking here. just Jim. deeper are just right, dichotomy, piece, the pushing? bookings pipeline, you pushed that are also that ones deals the churn. just that or are those the level Maybe then Thanks Are are Kristian. that they question think one still I'd Hey, those indefinitely? deals

some how the environment great is that particularly maybe And to well? maybe did then churn factoring that hear, price the on that is year lower adjustments the piece, as with into hiring last of much we

to allow happening bookings. that for that churn, push back it On prudent cancellation no or on we is churn that seems will just to you had we the gave possibility. we the churn evidence clear, and or me address I'll piece getting the scenarios were worse, Well, happen, first remember when that Yes. you let have circle

but we're a not actually strength in trend. seeing we're we're the clear pricing strength we require just did account the a mean doesn't renewals. I were trend. but trend, allowing possibility seeing. think fundamentally it And same of that would good got So, improving for I get reversal we certainly helps, more in the is that for reversal the really We

the our than year, you annualized in it XX% it put churn massive perspective, of Creo those if and in roughly you less Creo be entire churn rate for products. And product And Windchill, just and represent those to Windchill quarter the two two would X% bases. the took ARR on it and for

technology. we're mission-critical of talking adoption fundamentally about strong mean, I technology, our So

You switch can't it. from

You using stop it. can't

paying mean winding can't it, stop you're for down. your unless I You business

our sticky really products fundamental I think think I physical it's but not And are marketplace so tech, many for of are people development don't of laid customers. right A engineers that product good world of our just layoffs software a I in lot lot use. in So, getting think happening happening layoffs there's the in off. now continuing to

level on and no back quarter? start we a happens that think quarter, then signature got dynamics. companies being this to last higher There's coming pushing. saying, project generally because needed canceled, think of technology. it Maybe competitive typically do and next we What bit. this I it's do mean, approval, cancel, a Couldn't need you've little a delaying level they're purchase it little not the because it's I And sat push couldn't later? somebody order They're this So is just a And it's approval. I another mostly some push. of signature needs maybe

of sometimes will they expansion, is expansions, by seats back a you and is doing when hiring, driven that those people would factor the slowing but PLM structural cholesterol in the way which more economy. second buy getting be the hiring. and is if in the The now go need a engineers. to engineers, delays There CAD are just of natural lot happening. gets deals a hiring are It's about slowdown probably well, for company sort nothing down nervous of If

Jim. Thanks, sense. Makes of a lot

Jay of Griffin comes question next Securities. Your from Vleeschhouwer the from line

Your line open. is

the you both growth many a the rate, seemingly of are to you thinking able we've to for which and those both Thank years, for GD maybe or calculation, or do about products? functionalities so many our the grown are from by since first, gone the here at each CAD the those gain you. bases you Jim else Creo been think from growth corresponds continue last for mention? businesses, markets within sustain mid-single-digit to and And Good over at for years that least least perhaps the share to what through critical both at to care last least PLM we've active Windchill broadly, the active more in something those of you couple How evolutions over here evening. document. base have

secondly, releases, adhering you've product your Kristian you terms do in R&D done the in but the And then road group. to map, for have peer maybe well of smallest budget

about map executing to here containing how you or thinking expenses? that road of keep orchestrating on your R&D context So, the productivity from in managing are

Yes.

Okay.

You've got me a there. couple of different for questions

or monster it share trend would growth the nothing Let economy. XXXX, wildcard gain is as past, differ than in that our in from seat other had QX tough end what on a And think a was to when there Kristian, it the work. to right it just been me I happens QX an a QX There's cause macro We macro the the again Jay back a the of in and happening slowdown we acceleration snapback quarter was of say, was a then quarter, structurally it. where XXXX like like has we slowdown. and with our had yes,

there's get would that but nothing So, that the change a effect, the even trend. in in might my wildcard. view if slowdown, industry happening Otherwise the we that's is

make model-based think design carrying thing drawings is terms our is And companies XD that trying day important. I call is In functionality, what But the important. away. enterprise. guys of yes, some that generative The the is is, really go really ANSYS the simulation this to of means concept are critical

technologies parts XD engineers really how to there ANSYS them models and the forever like create a XD. the and done really with engineering, to they in together of everything process, world simulate has up In been is conceptualize where messed fit and

step And factory and down out convert behind that it dumb then to lot chain and they to to drawings. a the They information of sent everything and last all the and the XD the very is, leave get drawings else. supply

And gets turn tool whatnot. XD. generate off it and they and at data factory the suppliers so and then, And for might have get around them and remodel example, they can in these remodel, they drawings paths they the to

because processes long on the are the dependent how to shouldn't the drawings and all collaboration procurement and aren't industry drawings, get figure So has processes lines we based need red forth. so supplier we out a time, so said for different processes, but that need on them, to

XD companies process, annotated there's this not So are saying, XD is XD in drawing many, XD. model out -- any the service has annotated What do XD to down okay, the annotated in many in it up go now That go be drawings. suppliers, models It has happening is process models what's is it. models to to have to now. process, be to more end manufacturing go going we

not of a requires adoption now more lot PDF now suddenly with just about interacting data. that will. file; suite people the CAD, PDF XD a viewing rather suite, because need a Now an directly talking CAD talking lot if more you than Acrobat We're we're about viewer, a

software that's Many sold suites So PTC, I a it's certainly I CAD are move decides tell a a whole but can the at away you for drawings. industry, driver to when driver. company think more here of from

dumbing destroys actively somebody it whole by can has And that And actually it's be on downstream. shut a value, it down their that department side, only a down. not smartened they department back data else by to up leaks then

are markup that's So this models and model-based the and XD enterprise whatnot That's and whole generative collaboration. But quite well. simulation, interesting those certainly, technologies design a factor and as I think additive big annotated stuff. XD and viewing manufacturing, around printing, capability all

going I it R&D And not about think on selection, question project about about just, we been losing have count, body We've execution. actually battle. your not to winning is about R&D and it's lose strategy, last I'm product I'm the so what the finally, the product not battle. budget. is is, R&D Now, about guy, smallest an been it's it's

years. our lot larger Autodesk anybody, that developed some of a to products; French French for sense. on our for that competitors these competitors, that and German of don't nonsensical work; But blah, time are of blah, was actually they've but in make famous that energy blah, engineers working products anything Some don't them. spend lot developing particular, any a there's and XD of experience, products many mean

We prioritize execute get efficient. I in more many think, do. we're We're PTC, very think more too just what focused. rework winning it we I loops. that's don't at serious, just We the recipe. well. And We much much So,

in a to strategy. a efficiently takes R&D and is at win is product front. strategy we're not winning fine the bodies Executing Throwing what doing good it

You know this.

Our very in strong fact despite less and, R&D. the anything, that products if stronger are getting spend we

not Windchill It's engineers much don't working spend comment. last has has one on finally, on then, it. R&D. working like XXX it. XXX And engineers Creo we on

it people more If over have just engineers on other. XXXX you you have all each tripping

we don't within So I you spend want much. other spend people, not is think very, what think well I don't also envelope. a but we're as as quite executing substantial to very extravagant We're

very you Jim. Thank much,

Thanks.

Your Borg of next question Stifel. Adam comes from the line from

Your line is open.

Awesome. much Maybe two quick the Thanks just for so taking ones. question.

Just seems January. with, acquisition commentary first, in on macro, demand curious month of of the customer Jim, in any much. that the the there incremental from just obviously it And the month January both doesn't smaller so just ServiceMax, a any early on really prospects? how the feedback January. maybe to closed, trends softer a is started softness as like now have course, so just just follow-up noted begin far customers how on and on sound Thanks compelling, is things of And month but it you gotten

Yeah.

business first the month more start if in our a of you because at the third the on So here, looking, start the still majority is or done look of at question, quarter quarter, the quarter. less we're of the the of how's quarter our QX at

was to a of or week question stellar do are they write again. it's I or able the things down. very second forecast. it these two they based close have Sorry, bookings somewhere forecasted bookings close, up are So will last to will in we'll What be quarter pipeline. really the understand real how we'll didn't the we're a decent in we We're or with decent moment slide, are with maybe starting the pretty end between. mean quarter, things If The soft quarter a the on starting deals trending. the actually the at difficult quarter they question? I If month be first how in slide.

No worries, ServiceMax. on just

ServiceMax, yes.

I'm very So ServiceMax, excited see I about mean you it.

it. that how sense mean. customers thesis purchased We excited many but because of me, said can had customers want That's this into going what here. "Hey call common this to we contacted out lot very both immediately together? software We've a see you looked like immediately from We can contacted story." had us? ServiceMax are many I And customers the us, gotten customers has of should about ServiceMax to PTC Can through how Neil probably and mean, how it. was found be PTC independently a visit like also You look that customers and you? customers they get many we of we hear customers. have fly come and Can that

be think had So "Could just that the honest, saying customers little that give exciting. us unveiling of a of to really we're on slide. time concept of grand of mean obviously, a bit very the will to talk I I be pushing sort To we're for it little figure targeting of that will lot LiveWorx. And you before on LiveWorx, infinity kind that but that bit a back be I details?" we'll them out

I there'll customers. many, think be many excited

for have we one Rob, today. question final time

question next line Celino KeyBanc the Capital from comes of Jason Your from Markets.

open. is line Your

becoming departments more role a hey, kind Thanks Maybe fitting I just dynamic? expansion, been product how organization? about just of development, organizations we more you quantify me is the within one. Hey, and or for in. Kristian. their different secular this different organizations. within customers an PLM trying Jim, quick to teams, would it guess, a We've to and it is hearing When think use expanding critical

Yeah.

for them around. it PLM By file, with where what's one with and the must-have, together XD One to be can them XD or on. way, a said you to concept a files interact enterprise to models you present nice-to-have so and a can thousands going a about that to it that from when is I talking example, a need earlier design, all and model-based thing to big you're I is not models. and are it's hundreds fit going And interacting find understand of you're this thoughts. was of XD think maybe I moving dozens, e-mail you Jason system couple too

saying, who that a the the data PLM seat rid going the Therefore and everybody into going we're seat. they're out company think it's might all PLM CAD, transformation from to of forms whatever. paper XD So, files. purchasing going might been to Viewer, need driving manufacturing department, some with it type product of of proliferation be I what's of It always But need to it's into a are go XD. a happening technicians. into We're where service now digital engineering get PDF to in this is companies be is to interacts drawings going and is

equipment of We their XD they're pretty piece the in not models with onto the technicians if in equipment. envision when right service out standing piece it of front of a augmenting phone on interacting field quickly

So, that's it's true must-have is a than becoming I think happening time a versus enterprise a becoming what's the rather system while same a nice-to-have. it's at system, departmental

those proliferation think in really the which frankly is at good for this driving are of share I PLM, industry I but the same industry, the trends time. it's is PTC taking that whole think

Okay. we'll forward look Great. Thanks. I more LiveWorx. guess at to

Great.

Okay.

here. In us. schedule. time up have busy Thank quarter, next a wrap me for spending investor we let quite So, the with all you just

to in with want to case share participate. you of you want some just the I So, happening things

going dinner participate morning at the in and Friday, to York. to in So, and we're roadshow RBC Friday I tomorrow going -- an New together are in Kristian and going we’re tomorrow

Then XXth, on TMT here February we're in we're Stanley Morgan JPMorgan in San Francisco. headquarters conducting visit going Xth, March is On the hosting to both a that Boston. Conference

Utah Conference Virtual Tour JPMorgan additionally Xth. own to New Meanwhile March York Bus hosting Conference March probably XXth. or Yield XXth. I'm to February Xnd; going March on Barclays And Kristian's a in to my Baird Conference the on Global High is Bus Tour on Kristian the going in on going in on Wolfe a the behalf, Barclays Miami Virtual on

doing is of Wrenn, our March our executives Product one then And Officer who's Chief Conference XXth. Loop Kevin on Virtual the

hope see IR days in of catch again XX And course or one of earnings if call. lots those events. the about of Hope many you touch in you more to to here on So, quarter. points the our of QX in not coming

So, thanks again and evening have everybody. a good

conference today's concludes participation. your Thank you This call. for

now You may disconnect.