PTC (PTC) 1 May 242024 Q2 Earnings call transcript

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to PTC's 2024 Second Quarter Conference Call. [Operator Instructions].

Following the presentation, the conference will be opened for questions. I would now like to turn the call over to Matt Shimao, PTC's Head of Investor Relations. ahead. go Please

you, Second Thank welcome PTC's to Good Conference John, Call. XXXX Quarter Fiscal afternoon. and

On today Kristian Talvitie, the Officer; Chief Executive call Financial are Neil Officer. Chief Barua, and

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

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

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

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

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

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

take proud through Matt. Thanks, will solid I'm in our quarter. accomplished which detail. during results, second you PTC fiscal Kristian team of what the delivered We again

right customers. our track This quarter that the resonating that continues and on demonstrate of is products to portfolio PTC is with

targets, have today. discussing I'd to from quarter, into more like we some strategy detail updated midterm proof our going about points and Before our address the which

updated we targets. ARR growth our our cash To be clear, midterm are we flow is guidance. What changing have not

in macroeconomic we currency delivered over over X past now ARR double performance is varying which the conditions. the are digits We years have consistent with the constant low targeting midterm, through the growth

manage the targets reinvest while In good hit we our the addition, seeing. flow to into on about have business based development. growth a ARR because internal This of very ability is for process cash spending even we we our to feel are level we product appropriately our disciplined

example, our to XX% assumed growth. an internal spend as XX% year, This framework ARR

to addition are proactively growth, existing spend. also our managing drive to we investment multiyear adding In incremental

We leveraging the do global create could R&D of this that effectively resources customer to are skill product these shift sets areas towards able value. where the focus by teams, of the our the greatest we

environment allocation leverage G&A In the addition, we areas we make operating have areas The our ensure value. appropriate to and resource and market focus teams. in confidence from go-to-market customer are that investments increasing generating X the greatest create to our the aligned towards

SLM the and new currently creating example, an ALM in stand-alone to R&D, primarily instead growth. in applications process support we As PLM, away IoT rebalancing resources are AR and from of

and of While an are people on we is not it these charge this, movements be plan not there example how focus more put a will a to with effectively. our priorities driving greater restructuring huge associated of

three, two, driven five, is number on driven include: four, a As primarily by continued our ServiceMax, by by which Codebeamer number and ALM, X PLM, Windchill number product; one, lastly, Creo which CAD, driven product; is our SaaS. our SLM, focus primarily has reminder, areas which is focus number which primarily driven number by our

the discuss to to significant focus customers. to we of now X illustrate turn like I'd our bring value areas to

with touch and seeing on have what PLM products. I'll our we customers quarter, been Windchill SLM This ServiceMax of

product. our our cycle customers. mission-critical tend flagship be with PLM. highly system and really PLM PLM management, for of This is is Starting configured, Windchill our product sticky systems to life and record

because over CAD of the the reason PLM been of engineers is function grown PTC's has had systems historically their This CAD have is solid importance of years at growth that product companies. Part the helping Fox. so track keep last in few software

embedded complex. more revenue on Today's components more and and even typically their products. become the now are increasingly variants software drive of mechanical focused with growth, To producing electronics product products complex, more are companies have

software to Mixing the challenge. while a order. the compressing configurations and Simply same other their products face certain at offer companies tall time market. new that it get configurations, put, configurations a product time, multiple with products hardware diversity That's to of scale takes

manufacturing advanced or it way go a long having that system to necessity. of an And In clear journeys. later, a digital their PLM terms these to companies in general, sooner companies strategic is transformation becomes have

to both in and seats ARR, tend deployments step When see a expand automating as and large optimizing product about projects. serious workflows, expansion in creates their their of customers functionality. terms gets PLM we a This increase company really function Windchill

we This $X is a products leading business is over in and Getting equipment medical company a saw annual of revenue them. XX,XXX what to for faster top billion with new market priority employees.

their As Windchill harmonize within to and practices product related management. business first divisions they on their and configuration all a step, engineering R&D across changes standardize

both By ensures they doing updates and established performed solid remain engineering made this, and regulations. gains also that traceability productivity for work to foundation a the compliant with

not Before authoritative truth source did data. this their for Windchill, have standardizing of an product on customer

of they whenever that happened do into to what product their systems, time about. data they figuring conflicting out So, lost in and lot ran a why

introduction operational they also for want R&D. R&D, across they step other functions new accelerate was of drive To new customer products, lines. to this around needed collaboration the product Windchill earlier their do While within outside time first to expanding this,

to chain, to this they Windchill accomplish system collaboration regulatory, their manufacturing, quality, marketing. enterprise-wide a they deployment data, To their supply and goal, compliance leverage backbone product including for and Windchill decided teams, as expanded around

chain in supply availability process to around the or identified reworked relevant any team pricing the redesigned earlier, earlier providing enables in product issues be component be example, less with products data for For to need component later. or resulting

example our second cross-selling about base. is to SLM which for the Turning today, ServiceMax, customer into

here over is main which acquired ServiceMax, A First, our little a product service reminder year life SLM and cycle ago. that is we management, a

high-value in for management leader is long service ServiceMax products. cycle life industry the field

are only have challenges, customers complexity not Our competitive increased. also facing pressures

of are remain for new forced looking efficient steady if companies growth has They want Globalization margin be sources top to and they line expansion. more competitive. to

revenue, After disconnected decided both to service revenue. In drive highlight key. their scalable services got that the of here billions order service largest one complete the of in focus they their improve struggling growth a want on expanding customers, good of with the and tools their their service with example transformation embark is The annual disparate the to is elevator to operations on with systems providing to world digital in in to I profitability companies business. services way

service to of the about to that the they'll specific the field elevator, the be know an into work elevator. they They will future, bring course, to scheduled efficiently when and and so for service will routed know, their technicians elevator service the the the service job using history site. parts the specific go they And instructions right In ServiceMax application have site.

regulatory is regulated customers. application service of our traceable work the ease and by business how the ServiceMax the burden compliance elevator records having ServiceMax calls. Furthermore, highly during will This helps is the performed

our on trust. where strong focused customer have We've ServiceMax customers been base established of cross-selling into we

this to sales team freshers the line. And collaboration fiscal together. start across a ] the go this big the with the to deal finish aligned of of sales played ServiceMax in market we As PTC 'XX, getting [ role

and most other examples by executing our this and our didn't In investments our encouraged focusing also Codebeamer which during ALM, focus quarter, areas, fashion for each X towards areas SaaS. about. made a incremental are scalable the We advancements that that in of progress care focus the provide product I CAD on customers remain we QX

As to many during understand digging and them. of product address transition their we my you time as period speaking our with strategy. spent to needs employees, and partners CEO, before taking know, over I customers listening how into

which our As on time and a the focus guides feel portfolio about areas. good result I our I X of product this, strategy, spend

should a our areas emphasis to where value have continued a the that resources create You right to we win. customer see in and the on greatest expect focusing

to started I and improvement. focus on our have also for operations. where we to I've room excel began examine

fresh multiyear to early on are continue PTC to improve been But has a to drive know, efficiencies. PTC improvements. at ways As that a from look operational you observations will benefit journey my innovative

I'm the turning everything of to at focus we'll company. across stones, of new usher entire phase and a effectiveness look in and over lots

QX I'll hand that, With results. to our take financial call the through you over to Kristian

Neil. ARR Hello, both off delivered X. Starting again everyone. free and a of challenging Slide Thanks, in solid with PTC, in terms flow financial selling environment. cash results

to flow the are ARR As metrics business. important the our we most you free performance of assess know, and cash believe

excluding ARR To provide results FX disclose currency performance, basis. investors impact guidance a constant on understand the business volatility our and we help ARR of our

range. guidance results. QX 'XX, billion, currency ServiceMax no constant the ServiceMax At longer XX% $X.XXX above acquired QX, our our we're that end year-over-year of up and our ARR ARR organic of from in we fiscal so excluding was Note

cash came year-over-year. 'XX, which operating our In flow both also with up cash of our $XXX of cash XX% of were flow free million $XXX QX of and flow guidance in results million, ahead

our by QX, of we key while track flow in areas. operating in cash record continuing driven extended performance focus invest is And Our and ARR our our to disciplined efficiency. management operational

Slide to X. Turning

driven currency growth QX Creo. XX% our growth Windchill. by groups product driven was ARR CAD, by at and detailed currency in XX%, in the our at look growth ARR with ARR more PLM, delivered primarily Let's our growth Starting a with constant we constant primarily level. In

overall demand resilience. which many environment, quarters line our now, the has Despite for sluggish shown been has good top

digital by with a segments of the and and growth our higher solid transformation the unique our supported is customers. market journeys of Our growth portfolio footprint ARR solid

are rate model, challenging prioritize customer their strengths R&D for subscription times. through investments to These further our the by churn our our base propensity underlying own supported low and

our region. by to ARR Moving

across regions, QX Americas, currency similar we to rates QX. organic to Across growth mid-double rates saw in year-over-year and ARR were growth digits. low our with in Our was constant the currency growth all the APAC, in solid organic growth Europe constant

approximately our and rate Slide as balance. the repurchases, our remains assuming know, -- Moving strategic of and via while we goal, predictability free of First aim debt-to-EBITDA consistency cash shareholders free -- low share opportunities. a the all, flow our to ratio maintain into flow, cash our cash XX. to long-term Xx, And interest is to and you In given consideration return also of below to taking XX% environment

years, in And free Codebeamer we the repurchase flow substantially our our X So debt cash over given all pay we've paused use share our the that intend we down program. to done and as 'XX. said of acquisitions, to past fiscal before, strategic we've ServiceMax namely

revisit fiscal into levered debt and the we'll end 'XX, Heading the X.Xx were share at paydown repurchases. We of of prioritization QX.

we debt gross of $XXX and ended debt $X.XXX cash cash and million, million paid quarter, $XXX of the with by down billion. and QX we our During equivalents

expect We year to with billion. of debt approximately gross end the $X.X

by share increase results expectation shares fiscal X.X to incrementally Lastly, count a higher -- of versus X ASC million approximately shares and approximately rules, our in specifically count. in our accounting higher price we diluted the share previous now expect diluted share 'XX XXX, million under

the first in reflecting the performance. reflecting $XX With through the currency constant flow by our We're ARR expect year. that, range. million, guidance I'll to take deferred the Slide a our half $XX of narrowing low of our down range you to half ARR, the We're XX. fiscal 'XX reiterating recognize the million, ARR guidance 'XX we end up taking taking of and solid free fiscal the change high by cash back guidance We're end on guidance our

compared back that renegotiated approximately of half You'll we this the a fiscal in contracts. said 'XX. million handful to more $XX We've as $XX deferred 'XX we've had we recall of reduced customer fiscal million by ARR

with commonplace contracts, renegotiations happen. sometimes not existing While do

during as had these may of you handful recall that of well. COVID Some we a

here, the responsible working deals customers for result field run in while also with job like but a exit we're PTC. to customer-friendly right commercially that The thing the I higher meaning customer these call better what ensuring a doing teams rate and for in a terms do good contractual now, will manner,

reducing by value focused that revenue shareholders. end $XX the squarely we're up the remain high updating long-term worth We for 'XX our accordingly, our fiscal creation million, our taking end $XX It's noting by on guidance customers and million. low

$XX we're Additionally, million entire due the to range FX. the by of lowering impact

As constant currency you'll do guide recall, revenue. we not to

narrowing of Our first the well. range reflects the FX EPS revenue and of guidance half our performance impact the and impacts the as

results. our $XXX half reiterating impacted lastly, also guidance but the cash million flow we're first FX, And is by given the free

billion For to flow cash of currency which in corresponds of approximately $X.XXX XX% ARR million $XXX QX, to we're guiding billion, free XX%. year-over-year growth of for constant $X.XX to

like slides. we've But on believe reminder. to year QX We I'd reiterate full X get our ARR I'll guidance before set into do, and my appropriately. also next we guidance the more details favorite

difficult models, EPS makes help sell with and can is But to that these vary revenue aren't we performance EPS recognized providing XXX contracts way on-premise the primarily PTC relevant and revenue of necessarily ASC and To since variables predict on we're based subscriptions for you from the your to revenue the guidance. business. significantly

subject want ARR may teach-in than our on QX The are flow our 'XX cash to believe the new assess to if refer and you're metrics to that I to did of on rather free this best revenue the we income a business. you is, and call summary operating performance PTC.

maintained lengths. primarily upfront our time, X contract bill a we've practices regardless annually Importantly, consistent year We customers time. term billing over of at

results are free our over cash flow So time comparable.

currency ARR illustration what's an for needed Let's to and midpoint 'XX. constant of the fiscal get to turn Slide our guidance to of XX, here's

slide, guidance the midpoint we to $XXX ARR of growth half the fiscal of need the half added second previous the from we in approximately million than As $XX is million hit fiscal you the X years. range our see second 'XX. This fiscal in 'XX more of sequential can of

the of second deferred fiscal ServiceMax an with force expect 'XX, sales than we fiscal in the of Codebeamer, and aligned half million cross-selling 'XX. And ARR and $XX to had from benefit more enabled second in half of we

Slide to on Moving XX.

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

guidance. over see get our our illustrates currency on results the of the here XX to midpoint what's the needed can quarters, and constant the You right far past column to ARR

$XX guidance million net sequential hit This illustrative growth. of need of range, QX the model we to indicates ARR midpoint our that

the 'XX for 'XX Because our the range is fiscal and some tend risk growth relevant to year QX fiscal seasonality, full of ARR QX of the comparison trends sequential We 'XX. QX and see opportunity. in of balances our most and guidance both think

point on that flow, I made earlier. reiterate free to the cash Finally, want Neil

resource a our have to continue we guidance the degree collections flow place. in have due targets cash allocation in cash to and confidence predictability high disciplined our We the of and of structure

PTC of team customer strong have and expertise deliver conclusion, us. on and with and great relationships. value consistent a we has to ensure deep ahead In opportunities on and execution creation we portfolio a the strategy people of We're focused disciplined strong

over With like call and to that, I'd to the operator the turn session. the Q&A begin

Thank you. Instructions]. [Operator

Your first line from Nay Naing of question Soe comes the from Berenberg.

your outlook, down the of it's update you months your bit in ARR you so please. it reiterated more recently Maybe as quarter, little probably obviously, mid-teens could if as break with midterm terms growth -- growth Maybe start now. a X last outlook in had only been or

X could those your in And provided please? also, have well, changed pack as the you previous it earnings what's if growth building you blocks that So reference months? you may, to in back

first for Yes. add. the with Thanks Kristian the X and I'll question. then could start

this the across we piece. Feb my of business, After doing X taking on this I've and CEO been On the over set as make on I assessment as mentioned, XX, of sure to level midterm dimensions. all just target

we've guidance XX% era XX%, year, to stated. updated this For to our as Kristian currency constant

For

means, double as we've that as what X again, the minus And from I an of XX% understanding year to XX% company, years, or that past of conditions. X macroeconomic see over low plus growth gone range. varying for the been through you've XX% digit about average sake following

have midterm the it of that out low do make the in the double at forward and thing I was digits midterm my I company when target to all towards a put I way at I in targets, there. the at credible to mid-teens took current the moving target around the how of variables. the looked fact So market versus of the stamp a also look appropriate conditions want looked to the view those felt

do to . add? you want Kristian,

say that to and mean the every that economy had only other status time caveat talk mid-teens, we would I the Yes. thing I about so is we the on. of

this think just do . I it. to So way is cleaner

But the I just and of literally I transcript unfortunately. Sorry, any just got answers, afterwards. reconnected just disconnected read I'll but got now, didn't the catch I

best given. the ever we've answers were They

I'm sure.

eagerly transcript up. come I'll wait the So, to

question Markets. comes BMO Capital Daniel next Jester the of The from line from

leverage progress deleveraging I of one, that reassessment end move the year. you advance on you not by balance of the of your driver guess, have great any longer-term in maybe well to want the comments hit sheet, Maybe the you made the target of the two, deployment as you of how sort Neil, strategy. And forward today capital growth with view maybe opportunity? about why inorganic

Kristian. It's Thanks, Dan.

So sooner? is I think question why we buybacks not starting are your around

think The still $X And revolving mean, debt facility maybe outstanding. we still just it. that's favorable. of I not almost try guess hit rate is I have we is the to I in rate have the it gist way. environment billion-plus credit Interest X%. this I'll on Listen,

comments to couple We've of after we'll quarters those Fed, the by get got to going get look year any And left through and like today's soon. are it the anytime a better doesn't here, revalue.

we've And piece, of look the opportunities be PTC. strategy that as of of done to That always M&A to the history over accelerate at something clearly deals we'll a on the continues number M&A business. the

However, given -- is those areas focus a number organically effectively areas that my across years. like of over quarters aligned are the business, towards and extremely to we the company of next the currently, priorities execute assessment I the as

there things look well priorities or organic around care making sense of that focus do, sure at lot are currently, tuck-in said, my acquisitions a are make the the a execution we'll taken to being it. That always of the if on But of. business take

Oppenheimer from of the Wong line Ken question next & comes from The Company. .

Kristian. is for This one Great. you,

cash level targets free of have flow that we growth, $XXX you guys did that you roughly is ARR, to hitting in still assume same those as out guys should you previously? confidence of we estimate guess, targets. guess, I yet the million meet On coming medium-term able maybe are I

short answer. Yes, a

for And Fair Neil, in but what terms best maybe you of guess like practices do on kind I then driving asked what just enough. of here operating incremental should what you're leverage? we that trying that of in this Kristian, to terms implement All expect -- right. I piggybacks you

we've Ken, know, The the you job within has been As greater driving effectiveness team job. a years, doing nice business. a been doing many nice for

an within on our around direct I'm interact standpoint can go-to-market stones how done the as that customers, from a motions focused the sure indirect and effectively is are turning I'm with that here continue practices we thing making best But we also we've the as business the turn rock with on the but there, efficient and at PTC. G&A, that. been out our are customers internally of for best every assessment over to what's We'll there.

I a spend for what existing strategy drive value two-pronged can greater that we shareholders. around and mentioned, all As to every areas take value reposition incremental year and focused more the and ultimately, investments then could customer

taking focus so and around to driving as drive all we're look we're we'll sure at greater And and business a that, to vectors move forward. we the continue with effectiveness make forward those

Great.

[Operator Instructions].

of next Obin from comes line the Your of Bank Andrew from question America.

Has the needs So software macro environment? selling that any uplift And a been out? you the on mentioned on what bottomed environment in this happen for to sluggish. call view the has

also any are there. an life maybe can for out weak, but would And color just verticals industrial machinery, guy, ag, imagine which if I you point particularly sciences,

change I now tough it's in results. in don't Kristian, start, PTC. going despite see didn't That could QX selling having now change you at solid at X here any the quarters environment been least I'll for add. right

metric, to PMI, despite GDP, name So the deliver at look you challenging a it. We selling continues every team environment.

into We not seen change positivity, turned given some yet a they have maybe trend. not a have

specific deals. is point challenging industries base trying outside environment to I will is in from outside articulate really we're the that the a think broad of I of punctuated larger the selling say industries, --

deals begin the these projects been you that. be about priority figure how truly the PO X, the for large the excited the on challenged, the to sign are and building those key which large the around that X-plus implementation. quarters it's pipelines X that last to by That continues by So could digital in seeing yield transformation getting which are I'm get be same

current do Kristian, to selling areas most, environment see through. but in us clear, by area now be which we around continue challenging are continue the we to the securing That's right the really well anything and the the to those, don't work environment. To I those that impacts changing add?

think I right. No, that's

verticals weak And that any as just particularly within out being . certain stand specific industries?

-- doing you verticals we that our are in, know feel the From Andrew, we industry perspective, I about play good well. key

others. better doing are Some than

I'd say, very in digital a are transformation all going serious through manner.

the can largest So good verticals. certain much about verticals we quarter. It's and a close deals of our in in those actually position those feel execute we a how within question

No, it. I appreciate really you. Got

from Barclays. question the line [Operator Saket Instructions]. next Kalia of The comes from

I'll of discerning that AR. Neil, step IoT areas I'm interesting sort was Great. is, for to the about I you arrow just managing PLM, to evolution. was really next the like keep and you there just that that business? And joined, other while bolster the the what And sense? inside you maybe wrong. if putting Okay. areas you as what's question most being it correct of the one the want talked for Does very that you that make think about in think maybe And are in behind . But investment me wood allocation. maybe one, When specifically more PLM, things more resource you. that about maybe that

I Yes. say IoT X that I be for point Great matter again. arrows done of already I this We -- made most customer all AR, first did behind did executing the the . We sure And that, wood that those make to say value. very X move I of process. last you This months. started a that want have is that mentioned, point sentences the question, -- just Saket. more I would and make for significant to across

And making of great that that now allow as enterprise the components. Windchill, concept PLM, in a sure X is sure do referenced more is this There wonderful is adoption. I you asked, around to customer us make getting do system there's can is what that will which we

groups that understanding as the really I the group of through and is that an visibility the engineering Windchill and Number and mentioned an ability enterprise right? for data coursing example, all viewability have one,

through the sure is with the experience, viewing And best-in-class. IoT We're so development of making around working that that dollars from the user we're repositioning product these that data AR.

We're the tools seamlessly and integration Creo move enterprise points the can CAD stronger through by more Windchill. working design through which within

Codebeamer by integration configuration hardware points configuration management can an even with enterprise. done windchill which and through software management more be clearly working We're for

integration, the through a Windchill we're now that product to working field data in by vice be versa. working We're keep going and seen ServiceMax and can through which

So those that are the X big stack themes. and copilots And Windchill PLM within do do the within third other arrow theme data could and that all things we're is the putting foundation wood behind Windchill. with of seamless the AI the could using a great

value as Over use this how create an time, they in well way a for customers that for enterprise work them we'll as our differentiated through does system. as

of and show are lot needing us. our And it, on the of that. customers the bring because this the is us behind a So in theme there let's core, Saket, to around the on really again, priorities, great front us and up it happening focus requiring things, cavalry opportunities on in and for focus manner

clear. That's very .

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

just portfolio. touched the portfolio, corollary about on answer an Saket's your integrating the comments think I across Neil, cross-selling important to point the of question, necessarily an products has increasingly where now

rather products the loosely closely So more coupling coupling products. the than

that what terms the in over you of So might time, say, of, mean the business. do think let's regularity

ALM X-letter the think you the couple increasingly the of think various do How a as business. good trajectory. is business? about of retention? lumpy about acronyms variable on how the a closely business, quite do was business variability But you historically you SLM

reminder, to in really the job, Yes. question. integrations journey. Great a you for And it asking, a a will open and continue system. We're closed environment. a done It Thank nice as Jay. we've not have is

choose choose customer best-of-breed all okay PLM can a believe them, looks or have we see may the SLM, when But best-of-breed ALM CAD. could we And best-of-breed SLM, ALM, from that they that and at right? other for feel best-of-breed the with systems of CAD, interoperability and they for us, PLM, customer

will So continue we to that have. be philosophy the

integration That the creating seamless and being are of are credibility real integration has distinct given on Codebeamer that very is us UI could between right? with for stable points, them a tightened customers have a there's that, correct Creo recurring SaaS. ServiceMax, revenue said, native a bit, I which do really will with with because ServiceMax already that and more our mentioned, even Windchill, we PTC very now pushing little Obviously, more Windchill. interfaces we And business as value strong you is you

it the one-stop will away the time-to-market those props, greater quality SLM customer customers strategically PTC business point for we lumpiness the enterprise in shop. have benefits, through choose run, their helps why the product It takes we for collaboration, historically. a better believe to I data in all the we benefits, a number of create best-of-breed have as solutions But might is existed as So that. answered with main Saket's value for from that question,

so ] versus we system open. value-driven it being saying you could But it's from play customer edits will versus make a within us us closed [ only it's

going customer the view, term. long the taking in we're out, it's So to think and Jay, I win

early remainder let's for, incremental? QX, in year of Europe, apparently QX, Obviously, pipeline you this would that meantime, you next deals case or your large year, describe especially. of pronounced might the the in as how significantly In saw XXX say, the in effects have, of

guidance. So, into and to way fold the effects that predict XXX is there any

there Jay, a the be to happy me, with Trust we'd way predict If was you. to it share XXX effects,

Understood.

do can't Jay. that, We

Okay.

those but feel team, I though the really and on say focused world, can large-sized mentioned, of we a timing nice sales healthy are them. we the good have growing about. that It's pipeline closing frankly. deals, on top, all large been us of of pipeline as . The that's deals I quite across those always

feel second what entering half we about good in year. So we're the

contract main to mean the thing. the of kind Jay, and contracts, XXX the are contracts you upfront and be not that length there's contract. snarky And of the there's trying drivers will remember the about term I ratable the the

they're the incent a try decision to going But can move So on to those and and right And in -- length ultimately, new customers we X renewal main certain both transactions. includes that new drivers. are them. and for the Term probably make direction.

relates that it still upfront have perpetual as then the support of we're a And small we base converting. to ratable contracts, versus the still

So every to time that contract. and happens, ratable an taking upfront you're it -- you're contract moving a

as We SaaS. know, have transitioning -- -- customers to we're you

time you're the a is contract. taking picture. you an The well, ratable and do upfront into the that, moving -- parts, every you get contract moving So volatility

Indeed. Yes.

question Instructions]. Tusa [Operator JPMorgan. comes of The from line the from next Stephen

nicely net the new up last of the been ARR So has couple quarters.

kind just like you can You year-over-year. any guess, way these you have it want. I cut numbers of down guided,

But any And XQ this reflection of expecting live? does talking then $XX -- XQ? is or that were you Are go that million macro you the in the a deferred the now of when about?

let's QX I in also deferred guess, -- go So we'll the million $XX of probably order. The evenly is and between pretty split reverse start QX.

The are those clear, future just be they commitments will period, -- that a larger period. that They've other to and still have gone future gotten a $XX million, away. let's to contractual So moved just moved just right? haven't

and minor can direction. QX guidance there prediction as the tying of think be volatility results, cause seen the I those terms here Neil that macro. in really quarter, back it to little in In direction any really given few lumpiness change dates that quarters. earlier, past to And in either start around haven't of QX mentioned deals, Again, a relates of over can any we any swings

the for with as think steady results set guidance QX. We the appropriately all, and So all we're goes. she we've in QX pleased

in you just guided on in the then 'XX. last the 'XX for like appendix, the X -- X I cash last And presentation, taxes had, believe, and in

tax was it that years? think the that around. moving -- couple this for around on appendix guide next in cash Anything the of time I wasn't

No, not specifically.

it tighten just think be I giving we to it weird. again, was We trying And the disclosures. to up not was a other line certain were points honest, little on items. and items line -- were

and fiscal we the otherwise, target detailed so And other up just for 'XX. the we -- disclosures more on 'XX remain 'XX. to And tidied for

bit closing because more they've kind choice that's to in are a Is that pipelines your in been these like their customers X dynamic to a different AI budgets and where sorry, there just a seems obviously from with nature. Neil involved. faced of slowing generational evaluating So regard here IT get

so And close potentially you're that rates into as far these reallocation that of these you're is new bit as seeing there's something a extended technologies?

was and segment because there in right, And say I not. the plenty those, POCing in I a involved of firmness on why of them. such our and market, what experimentation number reason of is we're say is fair Absolutely is will it And the conversations.

cases Because copilots. on through calls We've call, and a solution other I'm promoting we're I this my for good practical ideas are use for out actually peers out, around coming on. earnings like put that beta while getting last working like feedback of mentioned number for not building service GenAI we

to is is vendors as I charge actually prioritization through what away do that Steve, what cases are this, what AI going the believe with for? thinking they're [indiscernible] currently that going the quite I'm frankly, POCs to going Where it. not are what use IT from And taken they're are, and with and

actually the now as PLM it So we've way ERP, I selling happen, the which than an in industry around or do on because to we causing it. but got migrations. work an anything CRM different some environment AI coming have there's no of will top think

because the you realized foundation AI the is the digital before customers a top this, and most are do at necessary scale. still systems of think We heap of have practical lastly, that at large terms I I'll anything in on our summarize of

SLM, customer you think to why for we that. And base CAD, need primed system offer and ALM, the like that's have what a PLM, I a is

Steve. good So feel dynamic, we about that

[Operator Instructions].

the comes Rosenblatt Abernethy of next line Securities. Your from from question Blair

side, as more SaaS and in How faring product Neil, business, are secondly, the that growth X those and rates businesses? look Onshape point? that's on is then . And of spinning they off AR would example, year? be how going you just to IoT consider there PLM, adoption the as . an this at you some some deemphasize Arena part CAD of would something areas, the other

up us value Those for clear. talking important X until is asked. our Because currently. value business. and are of of them on the Onshape areas a be this drive question So and parts greatest want economic I like very I'm ultimately, to not amount customer a call Arena, the focus to

on give now. are tasked Arena they on right those I Now the rather working than lists, what's enthused X and happening in with about I'm getting at Onshape later, is color are priority you that. will team and Onshape very sooner hard And what

have I there, versus when differentiator PTC. a product of outside others think we is of platform are that at the that dynamic right, of the a time out a great the a the friendliness customer openness, tool in huge SaaS

that part around strategic feel the So, by that and so terms and positioning. the I the a about we're I'm good Onshape we company. what momentum close becomes of of good far X as eye priorities about evolves top feel the which keeping in seeing of momentum,

capabilities, strong PLM, chain. seeing similarly, themes. Arena, particularly have the module trends supply we're they with is catching of very some there. there really And a interesting set good

staying feel them couple last progress that, builds. quarters. sure close in and Arena for I good seeing about we're the of to that making the We're momentum

I'm we the attention actually the summary, really they and sure ignored, rooting that they priority Dave sure make make not on from momentum those high that take advantage that being great to with of got got that have it Katzman businesses, scale. leader we're list. they've in They're resources making But X for the they in the a them with

the answers question. outside force anything build your on and making a I'm right sure creates And so the else that competitive just Onshape the focused market last on momentum versus now disruptive more business. in

support forward So as recognition -- well I'm and within PTC. their as their looking continued to continued productivity

I absolutely sorry IoT We're AR. X is AR to and because We're not first. the interrupt this take abandoning think thing, abandoning And here. I'll important make areas. One those point to not it team to

that new resources applications, systems. road very doing core product to stand-alone AR, discrete little map, we're our that are for expending not have tied markets things

versus So last that make actually applications, case within which -- years. AR few ServiceMax, the those core sense Windchill, the cost for items be that and been built like systems our upon stainalle more focus et importantly the tools has cetera, will

that important in to and stopping We're Windchill enterprise. the ecosystem sure capability we've ThingWorx that done they're going of that. still So enable similarly we're SCO, to since we'll in the support IoT the what expansion in we part make that's that position strength support SCP. but current IoT, entire customers because

abandonment, so allocate positioning we technologies focus of to of and And cost, AR we're where and emphasis that whatsoever. actually It's the IoT us. where an the not makes a be repositioning the sense for

sense. Makes .

Markets. The of from Capital next the line Matt from comes Hedberg . question RBC

talking we still We've just to rate. is spent CAD seeing beyond drivers you feels like this -- early. obviously, do of Plus like the digits bit remain years above-average a line trying I'm it what SaaS, it which uneven, several double impressive. but PLM folks get there core growth really guess when still you think question continued we past, from grow it? . I that macros above a the like guys time it's feels Because that lot guess like but continue are growth, about in about a on Creo How is to and pure item. I often outperform explain to get what

-- anything. want you add you're I'll and to if The So right. Kristian, start,

great CAD because my Onshape, that, on a this have what growth business a with it's happy growing, Creo. terms in in subsequent I given work seeing And very customers, believe, are rate. have we're we we to talking of right? We to really product and in our And small

by, competitive dynamic. mentioned, to we better I even doing do as the and the as That's expect well, given years come

a believe really strong I we have product. So

customer What the systems CAD their expanded with tech thing of tying the they as seats enterprise, as believe Windchill consolidation Windchill. disparate med they Windchill CAD when I did went they into, mentioned, had well. mention this company I actually And that's the the also sure didn't the is example I deploying make within to through same systems. right?

area. that on PTC for business the helped Which

the be CAD piece. I of helping, of that's that think, thread part and seeing So having digital the there's level customers a PTC

And so that's X theme.

then been now I is, which from digitize, movement more XD Onshape And potentially the some in to They the allows a Japan, world that XD. a month and out XD offerings moving to around couple Creo the world, just of In are to to XD. for and that's be there. in interest has still models, and X there ago, was moving competitive,

the occurring. I as of competitive competitors positioning other portfolio. we bit we growth, a of that the the with seats think with are it's majority display don't full dynamics helps some of of in us the the the it there's So but some

have about adds we've addition, . model model, contracting then, also Yes. model, of before I this, or that knows in sales know everybody the rate. run And talked course, that we but the subscription to the that model

Well it, done. Appreciate guys.

from comes from the question of Joshua next Wolfe Research. The line Tilton

This Tilton. on is Arsenije for Matovic Joshua

versus performance indirect channel. on question quick a Just direct

diluted guess, channel facing performance the the on a brief year? then . I what's think about that indirect they comp. any was points X Are I X facing? the follow-up. from growth, headwinds tougher And of for direct channel expectations macro your . isn't throughout

with Yes. Europe I've been some ones the bigger had spending time out there much with next in channel week. more of our

which, as on. sure we're channel sort direct What you the the as is my side, with I'll operating the and is, results under delivering same we're leadership, could focus and really solid we've of say energy -- been making see,

really that we've side growth direct bookings how the of by through partners the the we've do and our position we and pipeline consistency channel seeing I that to mean, driving And been think really ARR on the and showing. that, the been the

enablement, cetera, that will again, And next so prioritizing through, showing week. what's working I we're them areas, supporting them et like be been focus the through through working,

the So trend of we're we deliver making versus renewed the on sure channel the revitalize that just lines to growth ARR deals.

we're push that. going to so And on

our teams to And of we're I have if also expectation type as have results partner, deliver and pushing high seeing they a direct so. that channel must do same the the we

. it. Got

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

to Creo Windchill the Plus the fifth great area it's Obviously, into just the on just Neil. of around for X update Maybe Plus, maybe drilling strategy how SaaS. resonating. hear And areas. the an focus are Awesome. Maybe

decade-long just being maybe this conversations and going an how should years. we've give in the talked think a us are coming these journey. But about on we that about how Obviously, update

priority. a Sure. Great question. It is

make speak, working a . We're more we to making to conversion and automation We make sharpen to we sword, so continue we're in the elements back number happens there. lot customer approach, not momentum great. through and to build of conversations sure a continue our slowed have make terms sure conversions next our learning and through we office our down really work all our intensity experience where the of the seamlessly. sure to to

As I year as mentioned, a to reiterate, I journey. see this XX-plus

good. customers experience do with will is so it hand-in-hand the We

I that's So been think working well.

the is out product. our put Plus continued how view compliance emphasis also regulatory to We've that has that looking We're the received embedded releases into forward med issues and Windchill specific around we've greater in of new of device that sector, marketplace. to

out So now, not we Creo Plus Plus. just laying Creo. putting are we're our within We're even across release strategy accelerator -- a off the

continue we into invest to it. So

it journey. a long be Again, will

the rep, I might last I to into years. good and so We're speak, sure to ready feel Plus invest our XX-plus and conversion It front our that happen view attention strategy, resources few building the front make on and at earlier. As we quarters. on to that mentioned, progress scale to over we're for is okay that continue

Awesome.

Joe of Vruwink Next from question line comes Baird. the from

decisions. the back comes in going enterprise of big part hearing as PLM, seems it deals like well, just to as is this Neil, something up more regularly it particularly, we're ERP

contributes to to to can process feedback do that just more more time just studying recently and seems it longer customers the need and what cycles. spending I PLM studying that also, sales up workloads the be appreciating end think But the matter,

of deals. what bound base talking might growth the and about So if And ranges? at kind I you this low of maybe that rate, close rate, a a upper rate you're the converted planning high more mean that's about if you assumptions large probably characterize ACV wondering pipeline. assumption. how think big ARR on you case these of could imagine I'm for double-digit very are

what I'm So ranges end of upper be ultimately. poking the could guess I at

Yes.

are or given PLM large deals, some to a there's And of that deals displacements cycle, have some very broad to parts while right? a like portfolio are your expansion clear, we portfolio, we So close just closing PLM rates, longer. the be dynamics take some mentioned. point, of large the deals not faster

the becomes when selling of can't say and enough customers, whatever system steadier, gets the the rate, geopolitics is when can't smart interest to an in not for I predict tell environment I'm stress all can that you I rate our the I less dynamics close predict changes. What that. world causes issue,

which can of by -- external what the don't to in of years. internally what the is if all as a enterprise conversations, working market you PLM, you longer which clarity deploy on a company of in describing PLM, our we're exist enterprise customers the But is few know and value no level execution I do to they control the that will product

is how experience. that our products customers, great that, product important across and believe introductions quality, times, new collaboration fundamentally I entire the construct And customer a cycle PLM of enterprise to because is to deliver

do job as ALM, well SLM value. is don't sure And and we're Windchill it board, across as If the that, well as you using PTC dead. business we make what believe to you're show as seeing our at the have CAD I done show others already

just conversation happening easier this. the a working what's I'm you macro which in customers even see, aggressively becomes way can if this that so environment, in that I if internally, an And so need heard stressed we're through

us. this, can from wood more there's as already are Because many plenty for customers you but doing of results, to chop see

not assuming changes, a what that's do our I than opportunity pipeline, in have better environment math I'm and than we we of that put until selling the Clearly, around you large if greater And higher aspirations, change. we see guys execute growth, ARR me. to have terms but that

I gentlemen, Neil Q&A and to for the remarks. call our session. over back closing to this would Ladies . like turn concludes

you, Thank for everyone, today. joining us

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thank you. again, of entire PTC On to you engaging forward with team, behalf the and we look

Thanks, everyone.

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