PTC (PTC) 31 Jul 242024 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to PTC's 2024 Third Quarter Conference Call. [Operator Instructions] I would now like to turn the call over to Matt Shimao, PTC's Head of Investor Relations. Please go ahead. [Audio Gap] conference call. [Operator Instructions] I'd now like to turn the call over to Matt Shimao, PTC's Head of Investor Relations. ahead. go Please

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

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

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

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

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

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

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

Thanks, XX% customers. Matt. currency year-over-year, In of constant QX, is up we with resonating again demonstrating growth, portfolio ARR delivered solid products that our

take you quarterly cash was XX% our growth also Christian free through flow will QX and rising in Our forward-looking solid, results detail. guidance year-over-year.

Officer his been the more of and of today without me in . Mike's part Mike tenure who more We get be XX him. year the will into recognize at continue PTC's to transition we out end Operating years. President are success Chief detail, the profound has adviser DiTullio, fiscal we as wouldn't I certainly XXXX. to want of company the and into Before than an roles over

role. We've the to this will close fiscal he's plans, future more start structure. been that I've and At a no transition stepped me be agree execution, we discussing business CEO we our longer this and time to to CEO partner great When tenure, within as to key right stage involved been my approach both the start its process. addition, especially position In into the 'XX my with is operations priorities. be COO have of our directly for and it's leadership the

will be many of I Accordingly, Mike's assuming responsibilities.

an there different making and externally is of organization. are many visible incredible This effectiveness I company at I'm a Mike's lots said I'd is company. effectiveness already end, Additionally, in with intent potential. because quarter's the the this X-K, that entire we of across changes numerous change was over on of call, the have focus what that are made to everything turning in driving usher pursuit order like across looking our and we of growth ongoing while To an in the and that stones reiterate which process that phase filed in to doing other last of more areas we're new

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and with basic At the the the is higher focus pace areas can is need most driven is a where areas customer SaaS. the create focusing SLM, five, areas customers which by three, new our and resources our by greatest ServiceMax; reminder, and we which our two, product; are: on to a These faster continued at are attention. primarily we are level, X introduce are PLM, focus where value our and quality. driven ALM, products driven by Windchill As our driven our which product; which is CAD, four, by Codebeamer primarily one, primarily Creo;

lines help time need to product also worth not to competitiveness. from transformation It's what product hear companies in half. enable. without across products are of It their highlighting possible to they we offerings exactly which that customers workflows, our improve their not is together unusual their That's that is introduction bringing shorten software digital suite new our

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quality, data It up-to-date, data, traceability of ensuring that and accessible, is consistency the and product-related also the reliable secures actionable.

at the The delivered demand the are at right increasingly With is important do our our to driving potential, drivers a much time continue outcomes. I so to thread digital the customers. thread, have the better help is the customers initiatives right are started we differentiated There improvements. data ways context focus our can capabilities to strong, in core look our To to business to for this and unlock our taking on the and operations, people fresh drive right across drive digital right to chain. value offerings

some reality the to more support programmatically we in growth will our core of design R&D new success to from up standalone products. That applications in place set an us scale quarter's organizational creating that first continued resources enables IoT just Putting for instead discussed rebalancing away last step. was On future. call, us the and augmented

are optimizing our turning primarily go-to-market to our and G&A activities. attention We now

be Success. the Sales I moving Head leaned this between are of our Operating with layers As I Head At roles, Officer and mentioned and working upfront, customers. there without of the are Revenue less directly and Customer go-to-market we me we've structure, Chief Chief point, forward management our and so will out Officer

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achieve at The PTC. to significant opportunities are this here

discuss focus like areas lifting heavy fiscal continue X we I'd in the are the doing this significant in to innings our We illustrate to customers. bring to expect 'XX. the of of now to value turn we early and work, to

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

Starting with is systems be engineers for is This to Windchill management, This sticky that track files. our is had PLM the keep are and our flagship really on customers. historically tend X. of mission-critical of CAD software PLM product PLM and CAD Slide product. their helping function lifecycle

is PLM epicenter Now at transformation product digital the and initiatives of companies.

time becomes The quality gets product untenable, last to more design to get it the complex, explained companies focused same compressing much products As to impacted. continue time, I time market. takes on And to market the to products both and increasingly new get their are quarter, complexity and produce. at

later, or PLM a strategic that system clear necessity. becomes it Sooner very having advanced an is

both increases of functionality. their as is specializes function terms supplier automotive large good we in product In general, projects tend have harness wiring a in manufacturing when step a this see customers that our solutions. way design expand digital industry optimizing example and to terms and And journeys. gets to and transformation QX the manufacturing as seats their ARR long in in win companies and automating really serious PLM company their deployments processes A cabling go of Windchill of and about expansion a to

system interesting the to of electronic the of wiring outcomes. the Given that time, their unsustainable business to engineering currently cost company are supply company from R&D, became maintaining leveraging teams. of They beyond the systems, across and within homegrown their better using in tools they're rise using supply value this chain, appreciate software-defined their drive of importance but Over manufacturing Windchill this homegrown role vehicles grown. the collaboration system PLM automotive chain the and already drive and It's assurance both has complexity engineering, quality standpoint.

quick value, their and they system collaboration to and compelling They to extending to standardize Windchill it is that easy their time beyond as found around for their engineering on data. Windchill product backbone decide enterprise-wide implement provides

Turning to Slide X.

that example our for today been using equipment a products PLM medical now. customer The is customer Windchill and CAD for years Creo second has

going that interesting highlighted unlock minutes customer by thread I to the approach What's digital few a this ago. with is value wants

a Codebeamer customer to their testing they for digital about thread were After the Codebeamer out helped their Our thread forward vision. digital decided complete ready ALM and in being to with product year all move a initiative. they product,

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made their single operations with be customer software own selected The ServiceMax local service aftermarket to was and service aftermarket strategic source facts. struggle decision for services transform they truth their and the to compete initiatives. and that their their foundation to They customer service vendors smaller, products. it service of will The for time system contracts

so understand application know Before bring their to into can product the parts the service field, the need that going specific the needs with out that servicing them. about everything right technicians they ServiceMax they will help

application technicians the schedule efficiently and ServiceMax also guide The the will through and field technicians complex field route procedures.

to customer ServiceMax rates thorough on priorities base As service, drive that product on drive more installed customer top into of typical aftermarket visibility are selection of the of aligned based their capabilities deals, improve the proactive process technician utilization. and came and field was with higher very ServiceMax improved products, the attach

focus Lastly, quarter, areas provide we for examples SaaS. are and by CAD this also other our didn't it remain that which encouraged

X our our investment each business, we reinvesting focus made consistently value been footprint our incremental annual advancements fashion have focusing the in We to most scalable to QX, progress towards R&D executing and greater our growing a provide customers. that about. In in our on customers investments the areas care of product in

and all aligning disciplined should company work, is areas. resources This functions our to will you focus in be continued behind earlier, about a X As emphasized foundational I see expect across on our we take all time as this we focus will improving on through. may it our be of stone as not further execution. unturned, It I said, and progress leave seeing but will linear, and business our the focus consistency no scaling we operational

hand call I'll to and to over you through that, the our QX guidance. future results financial With take Christian

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

As currency you we guidance To foreign understand believe excluding of the on impact disclose important most performance our know, are volatility, cash the business. constant free and performance, of help ARR we ARR to our a flow basis. and ARR assess provide our results the exchange investors metrics business

guidance $X.XXX billion, XX% year-over-year our the QX, was within our up At of and ARR currency range. constant end

cash same time, at up to in results areas. flow key solid, were year-over-year, the invest focus free Our also continuing our while XX%

However, $XXX timing. bit of due we came below our in million guidance a approximately to

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

to cash resolved, model timing we 'XX business us predictable fiscal continue million continue $XXX deliver to our to flow the expect in solid, results. of confident free positions that With and issues be

XX. Slide to Turning

at growth Starting look detail. our Let's our in more product with groups. ARR

our delivered which has of CAD growth top constant PLM. sluggish growth In now, shown XX% and a Despite XX% been line ARR QX, we good couple currency overall in demand years for resilience. the environment, has in

challenging to growth R&D are the by our own and our solid our strengths the low and footprint a in market by their for model, high-growth supported journeys with churn segments further propensity transformation solid subscription Our base ARR portfolio of our investments is times. digital of rate These unique customer our through the supported underlying prioritize customers.

Moving by ARR to our region.

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

XX. Slide to Moving

cash given cash low of to predictability maintain the we a our First balance. and aim flow, consistency of free all,

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

we've and namely program. paused the acquisitions, strategic the Given that took on the we over past ServiceMax to years couple and them, of debt Codebeamer done fund we repurchase our share

our of before, to share we of at pay said end we fiscal to free And flow were down we'll prioritization As in substantially we intend We of saying, debt get pay-down we've levered repurchases the been cash revisit the use our debt and as 'XX. QX. X.Xx to all 'XX. fiscal when

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

gross of with end We 'XX approximately debt fiscal continue to we'll billion. that expect $X.X

up that, on fully approximately shares expect diluted through year-over-year. $XXX you I'll Slide million shares of 'XX, X.X million in fiscal our approximately With XX. by guidance we take Lastly,

accordingly, guidance end cash reducing million free $XX outlook. $XXX It's 'XX year-to-date our and of we're given XX% and our ARR year-to-date currency our and We're guidance Reflecting growth end $XX range 'XX, lowering constant by reiterating million. our in currency now performance [ to our the QX, ]. with performance the end noting updating expect updating fiscal our year revenue constant worth approximately the to of for the outlook ARR we're XX% high QX high flow by guidance, of fiscal million

on guidance. revenue to before to and we're the XX%. set $X.X primarily reminder. for since I'd approximately providing constant we and help reiterate But cash models, guidance for my year-over-year EPS makes guidance currency slide. and I difficult ARR free to corresponds like to predict I'll For next million of you revenue we've $XX more XX% billion, your which a believe subscriptions. on-premise billion flow of details get little ARR also ASC-XXX growth EPS We QX, guiding PTC to favorite $X.XX with sell of To we're into appropriately. But do, our

is the relevant contracts business. necessarily a may vary are teach-in that call significantly way to metrics revenue want from the to variables to subject to I our this performance we are of QX recognized did refer these you to aren't new if summary income 'XX believe the rather assess can the you the performance free that And on and operating PTC. on of based ARR on is and The revenue flow business. our than best cash

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

So cash over flow are results time our free comparable.

XX. Moving to Slide

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

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

The the And had is to years. ARR benefit sequential of million force in QX deferred year, and illustrative than million QX we that cross-selling indicates we fiscal of enabled net ARR more sales Codebeamer $XX million in expect midpoint added hit guidance of aligned ServiceMax $XX from This we with model need in previous approximately approximately range, than more growth. of this 'XX. fiscal and X we an the $X new QX to our

targets 'XX, We the that range growth out ARR and of range, But risk year looking both be and our I past we're official and in process. give with over the risk to and consistent our keep opportunity. low 'XX planning next when mind would with it think here, if in middle our line our fiscal ahead And we guidance, couple guidance further little double-digit medium-term again, balancing fiscal our not QX in and still years, performance the opportunity. for a the in both detailed full was of balance our surprised quarter

guidance somewhere $XXX $XXX also million million to would I anticipate the range within flow free our cash previously communicated. be we

we capital as capital 'XX allocation, as fiscal in think $XXX think debt about in the with million and level shareholders. resume see you we repurchases us Additionally, I to paydown returning share will around balance

Obviously, given place. wanted business have we portfolio, that quarter's solid process some in on thinking of a to PTC on our deliver budgeting great of comfortable the our We're but provide the next and pretty guidance and nature ensure strong of just conclusion, we and expertise with and we customer we'll official we execution on call, the model relationships. focused In recurring strong disciplined feel with directional have has we deep us. strategy people team opportunities a value consistent provide ahead creation to

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

[Operator first Siti the comes of Mizuho. line question Instructions] Panigrahi with from Our

to still demand about quarter. confident Neil, would you ask the or I the Has you leading environment. same? which about How data or want environment turning around, need the And look start more gotten it changed that to indicator before feeling macro the the past on worse do see what look at you when at has over turning you around? things

Sure.

the no change question, takes there. puts all across in verticals. we discernible Absolutely, QX, in any On and regions saw trend and very small first geographic

demand our environment QX pipeline we've way, is with was As consistently, seen we've been saying years. the is the going Good strong. couple to in by of consistent the thing, what past over very QX

terms actually indication looking we're more sequential challenged. years, rates absolutely areas on what past the of better of growing on have a we are of and the and so Chris become closing in when for ARR. the deals PTC a demand, how and difficult pipeline close I I'm few environment close securing for and looking growth those But terms we consistently better our where better close my is pipeline been and what about attribute in to would rates, for, about feel is good and deals In in-quarter rates accelerated terms in getting Once manner. environment is how the is they fact, feel in increasing focusing the is for of think I

next of comes the Tyler from Citi. Our line Radke question with

kind go-to-market EMEA weakness. quarter. saw about could kind making And as you out just you're of macro? taking you but is of the are well think of tweaks environment about the kind work, on on this Neil, talk more in assuming talking with versus kind you much Gap] that trends But of that do some how here And of [Audio execution throughout of QX? the play I customer what the know you

Yes.

performance the of First in delivered all, with QX. I'm that actually pleased we

In verticals. of the terms small of course geos in across change of puts any trend the again, quarter, very and and over takes

of on around been we've challenging focusing this clear, what executing different other of and in well has to been And I environment but again, terms change be environment. maybe And think seeing terms been very we're in real than in quite behavior. the consistent no calls, again, challenged. others customer I've

as how maturation landed will our thinking of QX the we account guidance. will view, point end this the piece QX, the rates up in we're And we around those ARR. our pipeline, into way in because close in in post impact deals and we in the guidance factors of and such ARR. the challenged, mentioned going our It QX expect Even in remains to which on takes I'll QX high The its it in also further how close QX, based show about deals into this take the update rates. QX of is, around in-quarter

from what So see from we up that is risk balancing guidance range, opportunity the end now of quarter. and we feel the the to appropriate,

comes Our next line with Baird. the Vruwink Joe from question of

and roles forward. you you the move you an expand makes actually and that at from start, opportunity a sense most on can where taking at customers observed responsibilities structure what operating and and org PTC the feedback maybe on maybe to also a flatter Neil, results where ultimately outlined you've bit see the

where the win. our wood we prior Sure. most behind A highest driven we have and to by we where calls is are my value around theme putting belief from which drive arrows. rate could around the customer that consistent where And

other we IoT forward consistently that of set R&D deliver repositioning of priorities And the outcome those for in those ARR how about been to products priorities . We X some of of better to to company capabilities the quarters. reinforce a talking back I've the last so couple did that's core of over in around, is priorities. priorities the years. is we number by The efficiency, we the particular, now not focus in functions, around it these go-to-market the next using this now have person effectively those are X towards happening company same all which across around is it's every and function product

we're in capabilities And by working the go-to-market sure structured company. is is the to whoever so making enabled, adequately is through PLM delivers successful targeting incented, which be and adequately customer model can returns expansion to our that is value they

we've using spending in it'd can those utilized things the that's really those demand pull that at accelerate we've anything be it, And through. it'd that doing is of the energized these R&D priorities. because of priorities dollar sure clearly, same on we're priorities, it, set be kind organization to looking the of so lot through we're we're from customers which very to these rest money because And we're what that and we capabilities, we're whether customer your by other that stones those working making whether greater towards all be a we're question, better serve been position X priorities is working seeing, could

early do, continue So that's how heavy XXXX. will much and into lifting at currently. innings, we're to looking work again, it And

from next Stephen JPMorgan. the Our Tusa of with line comes question

cautious competitor crosscurrents bit, of a maybe budget you you here and remind when around financially it's about aren't geopolitics we've just AI the what a the Or a And from been more kind more last of obviously, significant how seeing maybe like business [indiscernible] guess, is questions a quite issues? in of miss. you hearing are X.X key talk makes you of like different geopolitical macro, budgets lot Can for more, a the bit bit talked seeing macro, things had customers differ or They your X guess, bit guys us it your that. and I just being that. to about I related model Obviously, So you whether kind a perhaps? the years. on years, resilient something

Look, I'm We different Whatever them we're in sure any making within sales from we trend, just this. keep really question. than clear very sure what standpoint, mentioned, that see the play that operating vertical discernible geographies not change I we've dynamic a particular, our in Good happen we in did see we're competitor see at want a reiterating amongst and out consistent that again, dynamic to challenging same everyone PTC didn't here. environment. doing but didn't is Partly, around is way actually PTC. not been and verticals.

create I we've with And movement differentiated building that X under of towards ahead business not but operating our change across the getting portfolio, a these going the And it's the pipeline, believe and we that more that towards industry, and making seeing to with is been we making growing -- results drive I that product sure to discipline is is and we make types think, this of at environment. are thinking value. continue deliver consistent I are being Christian deliver commitments customer skis think on looking that priorities with great the QX a to called the sure we're why Christian continuing execution. and why to and we're I

a but I just And answer, a just all, first guess follow-up. of follow-up. Great then

of to cash are would that pretty like environment. close scenario, secondarily, in -- the is obviously, side, it And perspective, kind ready I your get think going like you framework talking take on a point. model I defensive confidence for giving to What it seems respond from you in but how guess, this like that to high below the would it what about in, are kind to environment be next guys playbook that able in lot you drive you type of to don't would we're to like it year to this next to ARR? very we environment. having said, then of year, Looking of the guys us to kind a have double-digit range

curious cash mindset defending is the stage. Just what this the at around

do Kristian? start, you want to Do

into Yes, I we sure. really guidance get here, again, next think mean want don't I details of to nitty-gritty the year. for the

said, I I this process process. detailed we're That working here our, we'll said, planning still play it, year. call As budgeting through we've think out seen that

rate. outcomes incremental articulated, we've the with top system. more the we range year, of expected a through spend we funding And year the the a more line. as we with started progress into comfortable, run on get release as we started We the As year

So that, that's to right we're thinking doing next do how that's now, year and for to and it we and we continue try about it. in to how we're gauge try would frankly already it, preparation

we're expense a putting situation into expense hopefully So not [indiscernible] actually comfortable to year and talking where modulating got it. feel pay where about really back in about we've we've next incremental ourselves

Adam with [Operator Instructions] comes question from Our of the next line Borg Stifel.

guidance? so is from and we Neil, the potential continued the how hear look about to organization. And turning all at in the stones fresh risk changes those there, contemplated especially that the over think maybe a -- kind as disruptions do term? changes in -- for potential do you, we it's of as about about entire go-to-market we how take think think you great of near the How

Yes.

exciting and I et bit of cetera, process, the One DiTullio, a here longer, had little benefits organization Mike now observe have great process. is people around of confident not what having change sure conversations, mentioned, as my make think I a maybe enabling successful PTC part as at very actually to a and them these X to feel position we're through customer months, for a of I've that priorities. from as to had our across to time to be can of of a of the and position thoughtfulness of thing XX part is transition many they strength, here weakness thoughtfulness, been the number a be

that believe work unleash to So to be people at is fundamentally actually been that a doing. here of the we're a lot I work to even value huge PTC they've doing going greater

I And I've it's our changes. feel it through so moves. about times more a really drive ability end, intentional these that done career, and to very are in going number to good be these And effectiveness. my of to manage to

maybe top by million, I And I the apologize lowered I quick range ARR this. if missed for awesome. Kristian. and just know we a of the end That's housekeeping $XX

I what more ARR. here? there last or I it talking contracts is Is different? something to And we're ARR being renegotiated some that if about lower this. quarter, was Or deferred missed apologize think due I

composition deferred Yes. those think reflecting, we last like was Neil they in and beyond. I And No, deals play pipeline to how roll saying in and into ability the and in the into is of how outlook QX deals as were to what no quarter. the ARR, of and QX This simply there is earlier, QX our and came about results materialize ARR well, deals changes was that of those reflecting around this other in are and composition the as the given look they to the QX the going ARR. best our what for expectations talked like

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

on no between things up free ask is the and want ARR emphasize follow to in of [indiscernible], you kind missed relationship of lowering want million it I of one guess is close this you and if I because appreciate is ARR your guys kind great. the be to differently. to Or of that the is little and year going I by the is periods? read? as midpoint the actually longer the last deal question. also I million is cash have Any deal you're in implies flow $XX that would always landed the being accounting kind prudent? that a Kristian, by of in free there flow. should just million that was guidance. quarter, I It that look, full color $XX number ARR there and this so, guess or $XX $XX And right if of I And cash a well. million later quarter the

here question, last is days great last just is No. simply customers a had I the bunch Friday mean in candid, the before, it were the completely on flow collections following a obviously, have all. It's X that actually quarter to and sure. Saturday contractual X but at or pay were to going actually Josh. to we case cash that And Sunday. we the the a actually being hopeful of the get that in of of were due week. quarter, Yes, free that timing. not a happened cash We right days be On

going on we that's hopeful so were were the happened what before. We that flow. the week And cash. that cash it on to get now We've got

issue. the there's the for flow the forecast no hence, year. So to cash timing change That's

helpful Super one.

more of also clarification. confirm a to Just

you last million year in balance that had just half, remaining in of that ARR into this quarter? all recognized with heading Can guys still million as the second that? $XX Is year. more of understand think this deferred the us some help versus I $XX you

of in it half quarter. quarter it half in QX of this I'll of QX. more and -- of was . Half It of in about and Yes. half precise, half about be last it it it

question from Kalia the Saket comes of next Barclays. Our with line

feels here close like the revised for not just maybe is Neil, for It maybe of, if reason X rates the guide. you. major ARR

that kind maybe about the for can know . enabled of opportunities of trended? And I sellers go sort you How really is, how those mean you team ServiceMax cross-sell. anecdotally, to are when kind that of and the this think And rates? course, so has close year. PTC about of I after feeling about those metric we businesses question Codebeamer talk

Let me clear of around rates. close make a piece this

right composition, closed whether we think QX the years. of for the it of our QX meaning how goes into the next general or terms to they happened in QX. and is ARR, about it Our now now in part for we into different years. actually whether deals of it the how of we're doing on assumption now view pipeline the been dynamic than going is deal-by-deal few evident into rates last maturation QX close QX a part what most have no guidance, looking of about that close at of in rates The are goes or part ARR what came know into the we in go subsequent QX We that going into know all

that point. So data now we have

years. now are and around have and in deals in pipeline close that quarters the the maturing all we've is with We assessment rates what made the prior seen consistent the

the difficult So not actually is into ramps over area quarter? And how ARR around the for that we've assumptions made continued worse, given time? that's on to to into come better. rate, when it going close company, comes deal a it the is challenge where all precision it's going Is the closes, ARR. not that And one it a be

put the risk those opportunities And guidance at all that determined the with balanced. and we we range looking factors,

sure ServiceMax, broadening are really continue. will What to year in are excited assuming interest will customers on close and company and buildup continuing we ServiceMax, terms a anecdotally reception a Codebeamer. gave that allow to market, that Codebeamer of from and starting pleased, testing we're good getting I lot say that Codebeamer year-to-date to that of buildup of quite that well the the close And strong off the in terms out like of for about that we're and of In that the pipeline Saketh. is, across getting about will the through be as last to business continued QX expansion reception the utilization into is momentum QX make of we for the next I we're from example work very interesting the the thinking are you really deals the we and as happened jump

that momentum so to of and years. to both over we're sustain on So fronts, far with have we close all the next pleased very systems the still momentum and go, number continue

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

you Well, let How rephrase. in are me baking

defense want to customers they the it's and or that pipeline whether decision-making, automotive sensitive I rates Your are election serve they into are whether that that. in how like process? expand, you industries some baking close or U.S. to mean aerospace and

if that you guidance then and how the -- framework, at baking So all? into are

change -- first so and in time U.S. Yes. where ask win in a time career my they the for It's customers part, put things much U.S. don't election dramatically who's confusing with the depending everyone the understanding quite executives the in me are I've the customers and the office, spending happens to around said, at happens of a whoever it's I different across in constituents that Jason, time think, and of the been the being of That consistent world, going U.S. composition that all the election. what across gets on what lot for a most

that and transformation, regardless from we've what competitive we world. we for the and the the years, number of around said geopolitics, of we're not last uncertainty, been becoming happening is sustainable consistent our will person environment, why have environment a I say importantly so all not say which customers the the most the continue are wars to is that the is we're we navigate to we thought getting period, this, given on that an through better. that through office or things digital office way of getting in on believe to the this is don't this part and guidance worse and continuing can time And if cost based got set going which in we're here. if We that we part person assume faster get we've to seeing it's hearing deliver of with because what are quality products more better an is and with structure,

Markets. RBC from Matthew of comes line question Hedberg the Next Capital with

Matt. on It's for Mike Richard

appreciate into the I XXXX. So look early

we the double-digit journey thinking maybe pertains of should that to a how how sort growth SaaS, move And be X areas. might evolves this that forward. we for contribute low growth? maybe to of focus decade-long the even it more year from . And that So as it's drivers how that about as acknowledging

Yes. providing quarter. we'll into we next fiscal the I guidance 'XX Again, mean, give official I details get when think more

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

not CAD the that [indiscernible] your If turn your should market worked historically, other your close words, Neil, to or if largest How ability And do that your seen on we of become broader In initiatives Neil, about comments affect Kristian, cross-selling? like then market, pricing cross-selling packaging to how the or meant to some that competitive, competitive, might the your other I again, it last market stone or in shifting late means. is internal benefit more becomes were And one abated. you're the making, secondarily, over Atlas, heard out a Could that the our platform somewhat years which common of lately. which R&D the share on the market. year, in the that on good increasingly have prior has responses, that particularly namely be observations you few stable competitive working it about to turning. perhaps deal in think out you've you frankly that on of elaborate we about changes terms CAD been had

Sure.

awesome have On X we're the market. CAD, part, ways we in addressing first on the which

cloud as CAD only you know, Creo, you got Jay, and which industry's application, know. Onshape, awesome, the got native, As is we've we

And of about will of starting a about great X to impact not We momentum. competitive a good It's very has meaningful the talking the it It's scale. it feel business, together, we to financials at talk our aggregate I'm our feel part building those Onshape. positioning. an competitiveness. so have business. I about level when

competitors. solutions got for that how But a strategically, are very think about successful the digital you a And continue they to is customers our against X being of thread. chips make ultimately, of thinking Onshape sure strong out is our from to connection we the the other is Creo, together our which that then value and are placed ensure some Creo many to belief strong about tool. Windchill proposition Codebeamer, very is And the there

competing, So we're say on dynamics several might deals the share Jay, in we're shifts we're of might that not. ready, cause I business, would different CAD

focused is aligned we we're customers, to love comprehensive on functionality, believe our in say products, an As Onshape, Jay I'll focusing point of on but in do is those saying, single terms making to what G&A, on you share to starting one do sure deliver around is, business is your in fronts and go-to-market hit We stride road on over of know, map. on to going particularly in and feature focus just we which and we it. going are the have products. building, stones here, team R&D, making the shifts, industry-leading in, very on where we on it's we're sure it. easy R&D, Creo continue your a you're scalability love we're player offering Every not their both on of scale turning to

need it do #X because for And our team is so energy the precision, doing that job it. with keep customers R&D and

an offerings. one, which of XX generative AI in July we fundamental this products. SaaS of because way, So offerings. ability to on by two, is that's the build just number innovative the layer offer by to continue add released to we We're month. which to And that a integration the with a ways Windchill We're team we build Atlas continuing continuing ServiceMax including, -- awesome into could quality our do time to great on have

to of ServiceMax Windchill release now another have ability ServiceMax a in able the space. federal be have We to sold alongside

build of continuing make sure the some we're to there. Creo to we're these innovations, Codebeamer, and So Windchill here. with pause and including Onshape at best-in-class I'll

Sandler. the Jeffries with of Our Clarke next line Piper comes question from

the What for is versus come going percentage from called sensitive that that to here we're to ARR I discussion of to to [ believe sequential what $XX a million to million upsells back pipeline, questions or have new million are asking or maybe on just but I need ] sales wanted relation QX -- that more that that $XX about on related contracts. out to the in rates $X uplift to going relatively you that drivers some hand Kristian, maybe a you've in ARR basis. in execution? be those existing you pricing that's might wanted and and of said the close to framework lot around ask

sure. Yes,

we a some different stab from And There buckets. is So at I about in pricing. benefit I it few take would think could think guess a it. I

we customer-friendly the there's past with of benefit The that. indicate from the one now, we say, that channel. probably other. That know, some channel pretty seen in front, the any the forma, certainly you the really change changes about tend direction number thinking years trend and pretty I up what's As start but been be Then on consistent years. couple there. for I moving haven't would pro would really to a in would meaningful in a of and a or stack has consistent been

into the business lastly, more the And pretty seen of transactions. it's those much it start? other the that's where play, it deals, you And large we've if some to of to of in degree that base quarter, been and of it see only base in Then it's also . get high And it predict large comfort. that's us starting a a kind have quarter consistent. again, but Is And on all would our quarter. is up gives you that of move certainty. a cetera. of difficult into that's to I in quarter, in So level closes, kind deal? there is dynamics ramp to part not with close quarter-by-quarter given then the the the deals the come and basis, any where really also going difficult course, Is et volumes volatility how

the remarks. will you. back I to now closing call Thank hand Neil over Barua for

us joining for everyone, today. you, Thank

Tech Here's what's at ahead be Rosenblatt and behalf of August Conference again, New York. conferences, investor Conference. December Tech you the will specific with to Citi XX, CTO Xth you. On forward Summit engaging to the will in the look our thank we Kristian join team, Virtual Global

everybody. Thanks,

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

disconnect. You now may