PTC (PTC) 1 Nov 232023 Q4 Earnings call transcript

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to PTC's 2023 Fourth Quarter Conference Call. [Operator Instructions] 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 Danica, Call. Quarter to welcome you, Fourth PTC's Conference Thank

being an the Heppelmann, of at CFO. Kristian is Jim today the Today's live Neil call On available are www.ptc.com. and call CEO; will call later a webcast, audio and Barua, be CEO-elect; conference broadcast replay through today Talvitie,

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

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

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

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

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

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

to the cash of cover metrics most solid in ARR and As will that of later effects currency are I'm flow, assess financial on line currency our constant the to business. results which the will the report metrics, usual, in PTC, focus terms I and quarter, results when Kristian free performance again important in pleased top call. fourth discussing delivered

fiscal growth in the been bottom on delivered line the I a Neil performance be year, ARR in This year hand growth top free off 'XX crossing best Despite XX%, of is with XX% seventh a reins on we will billion cash PTC's stepping threshold. we which as CEO a full to line, revenue the my delivered $X year consecutive the double-digit economy, me ever. years And great flow. Reflecting of forward. of and growing the has challenging organically last one the XX% for point going seat, Barua company

CEO indicated I'll Given my Coming commentary. to fiscal saw resilience. our comments our ARR transition a actively X. quarters the have QX a this to forward-looking environment we now, underway, and line sluggish for during on geographies. the the that's Though ARR 'XX QX focus and In top Neil QX, strength turning let broad-based the results good call, show on and to Slide manufacturing and many lead groups across PMIs global take back continues product

for low. demand shared we solid overall line the the QX, Our exceptional with results Customer And on up and churn did in than previously. full better delivered the had last targets year. year, organic in churn QX remained we an was in we basis,

Since the did ARR ARR is modeled, QX starts, Within business $X higher. ARR in 'XX had while was modeled. in or million subscription we than start the With lower this that greater signed fiscal not now of than we ARR, QX only the of we QX, that deferred but consequently XX% are is higher 'XX. Kristian in had million this portion XX% kicks guiding when explain deferred $X context, was ARR in higher we added than was of we previously. discussed the range deferred total XX% at XX% grow because in fiscal it beginning fiscal our ARR influx, to growth now to this $XX will million 'XX, strength to than that

year-over-year. view. million QX, ahead and in We our of guidance switching and of Moving free to XX% bottom our X flow to line cash up $XX delivered Slide

of ahead year, up guidance ARR flow. full the and million, is the our was $XXX cash driver XX% cash primary For our of Remember free that year-over-year. flow

So result basis operating a approximately points efficiency. that our fiscal and 'XX, target combination higher by efficiency. basis than delivered In in XXX ARR XXX higher of fiscal efficiency growth of well strong was XX% driven operating above was improvement operating this call which initial robust 'XX, for points we

We to expect to these improvements our subscription think sustainable, operating operating with will efficiency and model provide be continue we business us leverage.

X. Slide to Turning

constant global demand acquisition by ARR QX, ARR improved reseller On In look was was quarters, Europe, widened growth between in in at ARR SMB X% ARR ARR GAAP Americas of APAC, in XX%. XX%. X narrowed XX%, regions compared from our ago, and Europe in and the to Regionally, in as ARR APAC. China in benefited growth. and to the All constant a to growth growth reported our Let's than a channel. currency less prior growth growth the varying our we was geography. and inorganic ServiceMax. saw quarter was in basis degrees currency growth ARR due Versus reported

Next, product delivered let's look groups we QX. Slide ARR in X. CAD, performance In at our on ARR growth of XX%

LiveWorx primarily but the taking Onshape. Within supplemented in SaaS parts different Creo+ at market we're share demand launched the magnitude and strong We our as with this percentage Creo is as potential growth was driven PTC Creo+ for May, excited well encouraging. the offering about of Creo+ been both the event of these customer by and past has in by products, results, CAD initial growth new Onshape.

on. considerable Onshape and opportunities NPS with the industry the scores market lead take by the good see we share to that retention of margin Onshape, rates, in part a that solid focuses Regarding CAD

coming incumbent PLM, ServiceMax. in organic coming In recent supplemented XX% was QX from struggling are driven a be Windchill, managing the be demand to development competitive strong to and maturing ARR our manufacturing Codebeamer Onshape complexity. deal functionality Codebeamer. to with to or QX a Garmin's with was by in their differentiation. replace inorganic incremental in XX% wave already products thanks CAD great at ARR speaks growth growth proven hardware portfolio that with growth primarily organic strong growth rate the our decision system from growing to might companies of software by but but with has addition ALM, profession to

is most software automotive see Not rise driven other demand Systems. different to developed notable model cloud solution demand including ALM than that ever, the of deployments. well, do but years, lines, a we with we be manufacture That's across towards our Pure customer expanding explosion software-driven ALM contain acquisition the sales only product configurations options due While verticals the there has for as supplemented maintained trend industry of why of software been in an types. by to vehicles, software-defined more tools the Codebeamer and company's across all products need and products of in

always breakthrough Introducing our ALM Pure and Systems management company You that already manufactured will be able promising. software product. been differentiator of and configuration to probably hardware even at relatively product, wins robust same small, management offering this early Codebeamer peer position their addition the value are auto the configuration side many variance is key industrial the special more market Windchill, in with makes of of but of into landed sauce equally of the the solution, adopting the Codebeamer. the competitive proposition offer on has that for now the know Pure Codebeamer side has companies variant the The

Arena, with PLM and Wrapping strength parts our then. positions in by Windchill ALM in market. faster-growing the are and SLM the been forward We've positioned PLM going significant of my market comments well with in core strong complemented the share up taking

my me thank of and I'd you First, team over have who to like you supported to say all the years. heartfelt

it Your PTC today, to is scale insights has as businesses. accomplished CEO tenure of have during company leader what growth very a portfolio technology with transform much manufacturing and our helps the as strategy their the us awesome a transform that team and years billion my $X digitally personally and customers support into leader. the and unique company's longer profit proud product helped I'm XX PTC

thousands I Dertien, our wish they Von and under good the the Neil Neil's PTC Catherine as evolve including by during will pursuit feel did supported the as are ways team just of leadership employees. Aaron Barua. best new to them who I Mike customers and to business be same DiTullio, things in our Staats, position drove Kevin Kristian, Knicker the Neil transformation, mind. Wrenn, shareholders Steve in transition to for value other of all they create leadership

supporting over and on the February, I through in PTC let Neil the plan stage but to will of his the hand the forward. I take the the share discussions investor With that, transition background going perspectives to Neil CEO him business. to remain in future I'll call

Hello, everyone. Thanks, Jim.

I These customers, with our digital relationships opportunities transition. to me doing quarter much also meetings everything role, transition I'm X. Jim have been is partners. Slide to build and key to meetings transformation software our These and step plan. with turn to employees Let's to how appreciate The have soon is according is traveling progressing the of Jim relevant excited stakeholders. a to into ensure initiatives. the seamless visit to listen CEO well I customers' good for past reinforced and and CEO spent to

and looking lot working also investor PTC and and ahead. established business. with CEO forward me of down nailing on PTC's I'm conferences. and the forward I've a analysts, the for well to customers, the roadshows we I'm opportunity immersing continuing be has deepening of myself all position likely some Investor that that a is dialogue. transition. broadly, in strong callbacks it continues an with starting X-way and as meet many More Day, I'm And a of to end, after to spring are To you been looking in as there investors with clear to to aspects upcoming date

with Group example, announced that our Volkswagen one As work we at the closely on yesterday. team win I

footprint support PTC's at and customers scale. PTC product This significant us rely expansion their to the customers our on to of underscores value development at brings needs

company PTC needs of we business healthy a the a drive and product position customers, job transformation quality There's am goals. the that closed-loop product them in their cycle our Our is very help that been the has achieve teams life energized service. and and other I engineering, portfolio help built across manufacturers understand in strategy digital no to manufacturing, ahead. right management and can have by

XX. Next, let's turn to Slide

constant On of currency support top year is of line our the that shows layers consecutive cumulative which QX eighth double-digit our Fiscal the growth. shared expected growth. be ARR to drivers call, we framework, 'XX this

the consistent takeaway the is the top and and moving to go clearly growth. in ability the that of strategy. all to good framework metrics-driven the a direction, won't double-digit line is the but right through to ensuring my now, CEO is sustainability our layers of PTC will focus the of disciplined a performance. established. well on understand be growth drivers new up PTC's put contribute as This So I each is execution our

XX. Moving Slide to

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we Today, XX. Slide you term, top bottom targets over and take reflect line the to medium through Kristian turn growth providing more will detail. which solid are line that Let's in

PTC to are approximately As today, of we free 'XX, that be should you from singularly for its potential. ARR there full Kristian, and takeaway cash $X targeting fiscal in execute I is on my hear leading focused comments mid-teens one am flow the billion. growth from If it will to

company's the Kristian. years to you, that we product next I and value As the to strategy, believe ahead. the drive shareholder CEO, strongly Over portfolio in right consistent organization have and customer

of we in QX, impacted year-over-year. was The year-over-year start was overall by $X.XXX we at ServiceMax, and Starting than off our is million everyone. 'XX, On the In the constant range. our constant to up QX XX% quarter. we reported QX, currency our of our basis, end XX% as guided date timing. and guidance an the the XX. of constant currency amount point our billion, range. end Neil, $XX ARR Also guidance At in contracted that as key business higher ARR Slide to due high would $X year our landed million have starts around $X.XX ARR. billion, been ARR line with was Thanks, currency with In was organic hello, up ARR expected, beginning excluding

'XX in we're fiscal deferred XX%. fiscal million what in Now to range 'XX -- fiscal with approximately compared increasing XX% 'XX, in to ARR more guidance our $XX to fiscal started starting 'XX

Moving flow. on to cash

were results our free and solid million. Our million $XX QX of of with operating guidance $XX of and ahead cash flow cash flow

For the few flow, our assessing it's full remember up million, things. cash was our flow When to and cash forecasting a year, free $XXX always good XX%.

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up currency on $X.XXX XX% X% the billion, or basis. year, For revenue constant full a was

discussed we've underlying guide ASC the impacted believe free generation or revenue are ARR you our our by metrics to that to the potential. is not rather performance. so But flow understand best previously, business XXX, as of cash best EPS and revenue and do As indicators would we business cash

We XX. cash quarter the $XXX with equivalents Slide of fourth ended and million. to cash Moving

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

end of During In million cash facility. ratio, be in Xx cash our of transaction the a approximately credit our $XX We and $XX will we million our the million, debt-to-EBITDA debt billion $X QX 'XX, we including at hand payment free of our QX. was 'XX on which revolving $XXX included also $XXX debt balance payment which QX, -- payment with factored million term imputed on flow. the in funded revolver. $XXX interest, and into we included million drawn ServiceMax made on sheet, paid had final loan end high-yield deferred totaling in this and QX at The our the also of was notes, for October QX, of was down and

drew October, the additional Systems we in Also million on XX to Pure related the EUR an revolver acquisition.

Xx at prioritizing fiscal of debt be our 'XX. levered QX the the in expect below to below 'XX. remain fiscal of throughout We're and end paying We Xx down remainder 'XX

our down all our our year repurchase share of cash of this year program, We the into shares substantially we'll approximately $X.X debt expect paused to gross use debt diluted We've of 'XX, pay with and share fiscal and of our down revisit in free debt flow to to approximately the end expect increase count we share prioritization -- repay by down X debt million Heading 'XX. fiscal billion. and pay repurchases.

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

Slide Next, turning to XX.

top environment, 'XX and bottom With and that, guidance. how me initial at year. fiscal Let's our challenging take let solid a did well look against In the to on a growth. delivered quick X 'XX market our guidance Summarizing fiscal we for quarters all move consistently we results. financial in executed line

We currency on Turning basis. provide constant basis ARR on an XX. reported to as a both and Slide

removes differences FX it FX You resulted analysis see constant to business of have over the X is top way or ARR ARR performance currency as the a on the positive line quarters. our dynamics We can FX because of Clearly, the our reported between as lot the how best from evaluate volatility. constant believe and embeds slide negative. reported fluctuations past currency in ARR

we on That's constant provide ARR basis. a guidance why currency

constant guidance provided for of we constant FX year rates currency X results using XX, as For all and ARR quarters XXXX. currency fiscal September for the ARR 'XX,

at we constant rates. these provided currency ARR FX history comparative For also purposes,

same XX, fiscal taking for on 'XX. the Next, approach Slide we're

as 'XX Our 'XX ARR actual rate billion as fiscal reported on That $X.XX QX FX was baseline is based our September ARR rates of constant our guidance. XXXX. XX, currency for

and the For our constant this of history in upper these comparative ARR our on data can also tables on we've half currency website. you purposes, the slide see posted recast which at rates is

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

which currency $X.XX fiscal ARR to XX% from expect billion For to 'XX, XX%. $X.XX growth to billion, we to constant $X.XXX corresponds billion grow to of

currency flow from flows, our so organic cash impact constant direction. $X.XX of growth of in the QX growth at guidance on either rate. a QX cash of On for so billion we currency last to flow closed fiscal right $XXX constant we're our that that to XX%. the quarter we fluctuations QX guidance start exclude free will not corresponds of cash have Note billion Our can approximately guiding range in Note $X.XXX FX 'XX. to the ServiceMax year-over-year basis, XX% 'XX, be ServiceMax acquisition million is an

For operating We're been noting $XX million. to $XXX is since flow approximately CapEx results fiscal our have a completing flow of cash how million. subscription 'XX, assuming consistent solid and cash our our guidance model. for transition worth free It's business

maintain over AR, our growth. we our as for budgeting optimized we've consistent business manage addition, predictability is of invest helpful we In the generation cash few tremendously years. billing practices, The past our AP and and and processes

For example, environment, customers long-term alike. investments turbulent even in maintain is macroeconomic we're great a for able to which and core employees

free related because the the $XX we've our interest payment payment of deferred flow of of our acquisition on primarily cash a million This in which QX $XXX imputed million years. year, free Beyond over past the half of growth. than outlook. 'XX, is is business In investments our free flow our we discretionary cash cash be net or more generated accordingly fiscal approximately core the we our XX% solid more investments, and performance shorter-term or result flow expect and consistent The adjust of to ServiceMax. to given X less seen our in first 'XX, is includes

with in XXX to guidance revenue a But we're on revenue difficult predict provide continuing on-premise reminder, companies. short term the as and makes this your to models. slide, you for EPS to subscription help Finally, ASC

importantly, or as upfront that we More so impacted ASC do not not meaningful per customers influence bill by these the business. we XXX, does remember cash and Also, lengths. revenue since revenue regardless generation impacted, of indicators as margins our also view ARR is share annually performance to term contract important typically it's earnings of of

Slide to XX. Turning

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cash after has us R&D environment enabled macro future greater in. into expanded, this turbulent we've free our reinvest flows drive been to As to amounts despite year year growth the

Moving on to Slide XX.

Here's an 'XX. ARR for illustrative constant currency model fiscal

see constant our results column guidance the currency get fiscal our can the the for years what's on and midpoint over illustrates past 'XX. right of needed the to X You to ARR

illustrative billion midpoint The that of our range, guidance to hit need to year. million ARR add $X.XX indicates of net this model $XXX we

than higher 'XX is the this are and added we important to drivers some amounts While fiscal 'XX, consider. in there

as of in 'XX. have First all, fiscal to deferred we ARR we start contractually more discussed earlier, committed

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we Codebeamer to expect ARR Secondly, 'XX. be a in fiscal for growth tailwind

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things will our they Codebeamer sell peer Salesforce first set constant momentum. drive systems guidance considered. believe full been ARR We our we've range now. have fiscal will broader The ServiceMax, All has expect equipped and under PTC do prudently. our to roof. also having We currency our that ServiceMax be fiscal year of 'XX quotas Also, help 'XX

illustrative XX, for a Next, here's similar on QX. Slide model

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our generation for These X line cash items the to get expected us year.

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of can these You and earnings press XX and also X the X of release. on deck the Pages find Slide

driven fiscal be higher expected and in interest to timing are interest an our interest of payments approximately payments. 'XX, $XXX debt, rates the in million by Specifically, increase

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would comfortable investments. end is ARR increasing range, judicious to decisions the up investment driver trending more we're environment the of of in such If range, of guidance the feel free we'll fiscal continued of the such million. the $XX 'XX, the approximately to guidance All incremental support demand higher to million capital $XXX we're to this that environment more demand modeled growth. the end flow For expected is if cash is be being we lower the main sums ARR working trending that

internally prioritize spend prioritizes robust investments to budgeting a helps make. rate us that have also additional not We process want might and but run only we

muted environment, a sales make in want and but wouldn't it to we increase demand R&D sense even example, may marketing to investments spending. For necessarily increase

Slide to turning So XX.

want targets reiterating For extend fiscal targets, we're fiscal that our potential to provide our and business. also the But remind I understand 'XX, and that that providing We macroeconomic FX these on. could we're interest previous years negatively trajectory for been you rates we're the volatile and targets. recent positively or help 'XX, of rates to in you have targets environment, impact our the midterm

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law forward, cash Looking global hefty depletion changes also tax we're step-up of and fiscal in XX%. in due deferred continuous targeting of factors cash billion, of the reflects in free X-year flow our 'XX in free tax $X approximately taxes, operational cash of and a to flow approximately CAGR particularly discipline, This it a a factors 'XX which 'XX FY assets.

both million. to 'XX will 'XX, turning in $XX them expect payments increase on fiscal down in summary, In and and XX. while we decrease Slide focused We're paying fiscal debt interest to our

and First, strategy. a we portfolio have strong

is and We acquisitions of Onshape backbone their ALM CAD The which have position complexity more a add a Digital long-term category unique significantly product full already cycle. and further their year, our leadership in life which products. our market disrupt products Thread customers transformation opportunity extends a a the PLM to in position, addition software strengthens becoming for has this And ServiceMax with important was we've what of and and Codebeamer increasingly of Creo+. Systems become solid with across companies. interconnected to technology expanded This digital Pure capabilities the industrial portfolio to as our

PTC. organic Second, already, days growth needs industrial major at growth our but focus software product portfolio SaaS an strong of by on oversimplification With a our SaaS one we're companies. our the only meets starts all to in on-premise the with as early the driver it's delivery of for evolving major it The driven that of but levels the is only to customers. and double-digit of transformation important, model execution. needs robust

We continue system of PTC drivers, benefit enterprise-wide customer and driving to cross-selling engineering an becoming from specific and of through cumulative the expansion portfolio layers beyond differentiated including expanding our PLM department growth record.

our forecasted of currency is eighth Fiscal 'XX to year be consecutive double-digit constant growth. ARR

From with lean we a decade. improvement PTC's opportunities of continuous been operational is a judicious investments, back that that mindset macro a and of reputation perspective, demonstrating margin our well-earned we're part Third, goes and for expansion being a uncertainty. we're driving have cost more than We've mindful both culture. long-term and near-term

low drive the resilient. bottom model we're ARR flow you targeting ARR top and organic line actively growth juxtaposed demonstrating would line solid the in are growth. very business growth with generally We're cash we're that growth has agree drive and mid-XXs, I in team teens, free trust our team finally, Fourth, proven PMIs expansion. by that margin is that I Neil to expertise PTC. and deep led And and a ability continue have join Jim, and personally to And excited a help I'm evolve to will also while the miss

of we adapt can while do For and envelope will us the pushing to for what sure, continue the accordingly change, to we around still customers. will continue our environment

many back so create for to opportunity comments. With our it to trends continue we tremendous value our Neil for I'll that, closing way, pass continue positive customers With has of couple going and a to believe PTC a shareholders. to

everyone, you, your -- us and time today. joining Thank the for for for

to... we're Actually, going

now, We're Q&A I'll going to then remarks. some to closing move and give

first BMO from Capital Markets. with of question Your the Instructions] Jester Daniel comes [Operator Wonderful. line

what you is is This obviously, ] prepared Dan XXXX? hear, a are could driving how great thinking Aster better-than-expected this bit into year, strength? you at the Kyle fiscal further for on the And retention the is about [ guys Aber Jester. maybe into dig year In which to you this, churn hinted remarks,

Yes, sure. It's Kristian.

really discipline Two, IoT product has a churn. have to for lengths, been frankly, have to we've now for with which help helping. journey And we've churn segments our years this particularly trying more both increase improving and driving been So on commercial around realization. longer as that of there the been had -- we've AR. is higher it's been drive number and programmatic different of few term in such price has some One Three, things. change market been maturity a a

So some we've of pulling those are on. that levers the been

I as I'd spot to here, Candidly, over I will a to the years say it X in than or we're think more a improve muted continue from been room so. pace past there's even more it at be think stands. it's great albeit

Oppenheimer Next with comes & Company. from question Ken Wong

This question is for Neil.

So mentioned have had gone you the some with you past, share fiscal strategic guess were 'XX it's involved target us? in the you plus particular there, right number I that assume might to definitely that that very was Neil, obviously, but that financial Perhaps introduced, skepticism 'XX I think there in fiscal you to and nuances planning fiscal with that the your out refinements specific map into trajectory. can Any put perhaps road on to that the stamp 'XX. or

the some company Day got But continue. that the at here. days CEO you last something Yes. year here business is multiple February, we've I've and focus actually and trends we're that a themes for will in And time the PLM confidence this that update around there that interesting, Ken, transition and we transition. around more the of the the as give for more planning that that confidence But the is giving supporting the seen of we very expansion spoke believe XX an end obviously, share, capabilities comes again, a Investor I is me the couple me guidance more out past that to the put few and of indicated. of comprehensive since something on on years things, more the around to

as strength. well As this ALM

'XX. as things the we're on the but opportunities, what given is in have with I were shown momentum the only the and in SLM, we'll ago. And continue ServiceMax in And that to the we're we've been we by and advancing is focus that levers also building an we've think building fact on within and showing, we've but now the that solutions seeing enablement more XX into to quotas back given not that those see that augmented to connecting sustainable peer keep and show the the growth that piece marketplace area that of created that trend days sellers, of SLM now that to 'XX well. something beyond be lastly, we're cross-sell doing on product area I some momentum,

Celino All with question. right. to next KeyBanc. It's our Jason We'll move

Codebeamer then ALM with of deal, I us what a on if strength, X years And the knew or really Kind Volvo the doing momentum follow-up don't in seeing. know we're Great. X this PTC that of ago. was any

maybe Versus not from how may of existing when an products? much even who upgrade have So displacements of this customers versus and that other product I and for, looking ALM ALM is sense? makes Codebeamer tools to if pipeline existing customers about the wins legacy ALM strength, the think

Yes.

front in talked Let cases release the strategic for the code with we beamer where use a me large take a to about. that entire users press are all the Volkswagen enterprise this. across indicated for enterprise we their their relationship We question. deploying end Thanks of

particularly of One getting segment. logos, this automotive is for of the that new a in the we're an themes is enabler and spear seeing actually the tip into

seeing course is element about, that Codebeamer will tieback of on that in as we to the the spoke other tools that now differentiated the of its we're marketplace momentum PTC also creating with within push continue PLM to What the over is year of capabilities actually the with a well. displacement that this

I Maybe Neil. add, can

Just least OEMs. with of with win. with if big to those, auto ] X And transactions we one Codebeamer other in did with PLM smaller, I put In [ at prior then could. have quarter, meaningful business ALM Volkswagen some fourth The cases, we or actually into global the X no transactions CAD, type OEMs. this sort and

mean, we new down that certainly, upsell logos sometimes really what's But that with. is PLM knocking no from relationship we ALM and big had I have the can name So the we're exciting previous we position. from position

comes Capital. next from Barclays question All right. like Saket our with looks It Kalia

what Neil, you the the you Okay. Great. bit oversimplification Nice met to maybe to cloud? is, that you guide new to customers little time ServiceMax, as framework. with a we've that to CAD SaaS the intra-quarter, But it's see taking do before that not so they know I for a you long-term PTC. and question the quarter of an higher-level least at for your and in said think come from a question. focus as about on the clearly, background SaaS PLM maybe if well,

Yes. Great question.

terms is So there important the an of in the it cake growth off, we interest continued in layer that first drivers. of offering, sustainable and our mentioned is SaaS

a expect decade-plus -- with S-shaped an this journey. told I you, is We've also a As this reminder, curve. we agree long is and adoption

by by only road journey for 'XX. into be regards to from logos map, We new continue seeing in customers, on for way, And the Windchill+, to which continues interesting. the feedback opportunities not this Creo+ conversions but we're ability also the

we hand said, secured, do experience said, customers. SaaS sure are being one in SaaS. has conversion into I those already making mentioned, important being of working of 'XX in our on, now, pipeline here to the to we're quite my upfront we've customers little hand optimizing we're working ensure those overall and the frankly, very the That we're ARR opportunities with That here that growth that with drivers thing's right the

is a journey be focus. far decade-plus across were existing base but new plus of of key part that a multiyear will our long those this the Again, customers our

going even other to working are layers the I'm that well there many further team push that of accelerate. right are help extremely to cake now the However,

lot the my here? the of is little year talked visibility comfort out Maybe to into as you Got in or level question Great talk visibility follow-up you late. another a you it. deeper can see deals And think something the you sense. for in ARR sort which makes beyond mentioned double-digit growth of Got just a year maybe That continued continue Kristian, joined And that. your the and the to it. a I apologies, next you. call for little that know bit look past. about have is level one clearly deferred Maybe 'XX, of uncertain macro. we've on going of I of ramp into sort level ARR. of I about

a think have level I Yes. lot of I mean, A visibility. again, pretty contracts are we our multiyear contracts. good of

So even renewal not for up fiscal -- they're 'XX. actually in don't coming you

retention we incremental up that's for point already rates this again, ARR, many out, coming But deferred which we've that, portion deferred But also years. have renewal. quite point high. And at we provides more for have some visibility have had as are our . also, You then you do ARR obviously

right. All

from with Obin comes question BofA. next Our Andrew

Jim. Neil,

question specifically Windchill. a and Just on PLM

You growing I your with customers the this the business. value guys And monetize that? successful been to If have What's for more sort of you opportunity of very guess and charge people there beyond existing opportunities? have touch sort question as Are to I this could chain. digitize of their on revenue digital build-out the services? sort are . there's users, expand Digital right, different Thread? opportunities the operation people as the What of

Yes.

and here. and the me take could support Jim front end maybe Kristian Let

is groups as of an now to I also expanding within now closer example. over only like mentioned, engineering, that As chain, And right one adoption as is customers. engineering, going quality seen our it's the to supply seen we've what not you around we've drivers Windchill's other like many years that tied within is mentioned, but

the sustainable will next To add? area approach seeing medium as moving that becoming in explain of enterprise-wide the potential spring. trends take Jim, Day, thread that in detail this and system already strong as over about Windchill think sustain Investor migration some asking we're showing said, points we towards the that into seeing that, periods you're the more lever. long pushing model term, and revenue to are we've outside get to we particularly metrics-driven base do time, we think do on Kristian the of that hopefully, to more more growth be about that will economic this on the over an we'll working of of Windchill, how And of been digital a in be record, an we're that is within about as we internally but of ourselves that want clear, Kris, that you early the some

to a the that Maybe long enterprise add I in generally adopts a has that an and broader deployment. expands broader more XX users across been XXx would customer enterprise there thumb our engineering than rule when of There's first engineering. to are then

saying, with basically logging of been they're into may need be the drawings on typically opposed wrong, getting so to digitize, everybody enterprise data have and system the date a working companies as as and so And out the on and PDF and and files exported data passed that's in to system et maybe we real-time cetera, forth.

it Neil the is discretely So opportunity. that little there is Investor to quantify think offering I more a I a think yes, bit And at real Day.

question comes JPMorgan. Tusa with Steve next Our from

you bit on percentage Can Great trajectory? put out? little Jim, how for the turned I if like illustrative would think run where annually had least you guys you an by I us kind update sure. again. congrats a of you'd of that just at -- SaaS year-end or guys think of we could 'XX. you some out ARR a model on sense of Maybe be get as color said

Yes. think had I in be and we was in that's we -- I mid-XXs the plan said ended. to where mean 'XX, what we

then just Great. long-term Okay. cash on a targets. the And question

despite numbers around pretty on an kind because But anything of You're numbers back some model. and strong these nonfundamental the -- I to that moved up incremental haven't putting you basis good headwinds? headwinds. gone seem the operating old the other despite

taxes XXX% the going go interest business. to are isn't operating But not no, when are just we to -- Like going the really Cash meaning takes, the sure the I'm question, payments talked there it's some I'm down. Steve. about understanding -- and come up. puts of otherwise,

comes Thank question Looks Jay from Securities. like with our Griffin you. Vleeschhouwer next

map PLM is does important acronyms. One LiveWorx, rather PTC and is I thing does X-letter your that for detail CAD, share some you think for and instance, other the at product that in well, road

often whether in into look Kristian, for what you which in when of or our or are coverage, new care concerned our product packaging you Neil, question principal channel in for implemented of far sales the [ margins, out that Anything developing forms in it's that the mention about release that the be some terms then with of? executables is you're that's up kind should 'XX? to else a you've DPM come new you aware working And Jim do that further for your 'XX, programs, that field account or channel that as segmentation. think ] the is Atlas anything of past, development XXX we customer and anything like on, mind, So as of portfolio

Jim road thanks Jay, support I'll the here, for question. start could map. off and So too. On

call. SLM, on that First, the I'll in since take was last question this a

preventative tie combined on are We as ServiceMax that closer reception December capabilities. a use in of ties believe the have a with to marketplace, cases the Servigistics in well IoT nice release that same will to for release, offering to a we X as between working ServiceMax the maintenance

order and that of continue doing In what the for seeing in of number the how that sure Codebeamer strategy. an have the taking making plus things by through That to the And leases customer pipeline to to and piece. and Atlas Codebeamer on experience that it's Pure regard the for are the end as will and got we're terms user looks demand scale relevant capture in ALM way, to and as by right, to continue we that needing Volkswagen our of in augments a way, scalable grow Creo+, said, 'XX. we're them as deliver with we're strategic Codebeamer, working includes, and here, make in is well that third, I that the support that like to broader strong enterprise in us of we've strategies general area companies the we're Plus priority, then all a remains emphasize this to Kepware+, portfolio, Windchill+, sure

anything Jim, to add?

Well, by talk functionality, is cross-selling of drive and And particular, whatever behind. want to a tail not Codebeamer, then it. second make kind priority projects projects out here, a just observe, top in SaaS to is the being scalability, listen, that like drive maybe we priority, called sure to a products, you we're where that tiger you responsive have far certain of

I I be on could think said. it, reflecting you a what would characterize way that just

Kristian. Jay, it's

get to X question. part of the So your then

actually in to we as some incentives to continue improved rolling -- retention that well out drive we're yes, help in So that have space. drive growth the to channel as

can refinement direct of a both really is side, see on CAD, So on there a And the some then great the better. would have. portfolio the that that's And PLM. to parts programs and and selling focus as we We there, are obviously, on job I Creo+. also cross-sell on-prem do of focusing they say enable Windchill+, to already SaaS, territory them at want enabling that just other continued to particularly coverage them we

So that's . where we are.

comes question from Blair Abernethy Rosenblatt with next Securities. Our

Windshield+ what just there you expand that know the little few wonder been I to positioning months all sense versus, been Jim, only be pushing can the there. are if And that But in it's the a more uplift got seen how you Arena also, in might as at I out so far? you've say, if there? revenue a have Just -- any of terms just you you've wondering market? Windchill+ on what

versus differentiation are the I want Arena? Yes. Kristian, address in terms what can you then seeing we the and to do of uplift hit

Yes.

an right, than communicated, from uplift. we're So from kind modeled we point continuing an what uplift that of uplift at to this Xx or see better -- have perspective, so

we're think that's opportunity, I but the way the think now. right think to still I continue through we'll about to that's what long-term we progress this seeing see as

And versus on show maybe add the Arena wind could I positioning.

So enable sometimes other CAD with Windchill teams kind and systems to Creo with Thread. Digital up this of

And this So thinking engineering service. complex complexity they're used orchestrating so have vertically they're products, and Windchill's again chain. more get typically up down larger and by manufacturing, that who value the used does all companies integrated, how get data by

development with other of sold software lot Onshape companies. typically teamed tremendous Typically, up and to smaller, is lot companies and manufacturing. have the product high-tech on amount agile a Arena in a contract of of fast-moving this hand, electronics, a

at problem an company does or solve and team different a team it's in how with even So manufacturing a trying excels to suppliers another Arena is contract engineering perhaps that one in that. involved work orchestrate other to Arena

more more frequently a the configuration, well setup product more much on example. electronics you much than operations of on -- is industry, that type Arena It's manufacturing much suited contract so to focused in see for

that like pairs with Arena very So and of purpose number stake nicely a something product is fair this a little line of like say with have. special addresses Onshape, manufacturers nice or of a a that, bit a problem red I'd sort that

you. Thank

session to closing now, the call will up wrap turn I We Q&A back will and for our remarks. Neil over

road everyone, today. mid-November. us Kristian Kris Berenberg participating be ad your also will ], in at Conference the the and Thank joining will I questions investor [ early the Kristian you, for will NASDAQ both and the Sure. RBC in weeks at London conferences. and December, on in for we'll be be conferences. in New in and to be York going

the San December. in Francisco early in at Barclays Conference be I'll

forward and And on have reach engaging you're by headquarters We behalf in to again, we Kristian visits at also bus please be hosted of will visit X you. Boston BofA to or stores interested. the early us if you November. with Mike team, DiTullio, out, our look Baird, Those thank coming and to

you that you. call. Thank gentlemen, and Ladies concludes Thank today's all.