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spk11: Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to PTC's 2023 Third Quarter Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. I would now like to turn the call over to Matt Schimel, PTC's Head of Investor Relations. Please go ahead.
spk12: Good afternoon. Thank you, Josh, and welcome to PTC's 2023 Third Quarter Conference Call. On the call today are Jim Heppelman, Chief Executive Officer, Christian Talbatia, Chief Financial Officer, and Neil Barua, CEO-Elect. Today's conference call is being broadcast live through an audio webcast, and a replay of the call will be available later today at www.ptc.com. During this call, PTC will make forward-looking statements, including guidance as to future operating results. Because such statements deal with future events, actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in PTC's annual report on Form 10-K, Form 10-Q, and other filings with the U.S. Securities and Exchange Commission, as well as in today's press release. The forward-looking statements, including guidance, provided during this call are valid only as of today's date, July 26, 2023, and PTC assumes no obligation to update these forward-looking statements. During the call, PTC will discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's press release made available on our website. With that, I'd like to turn the call over to PTC's Chief Executive Officer, Jim Heppelman. Thanks, Matt.
spk14: Good afternoon, everyone, and thank you for joining us. You probably noticed that we have some additional news regarding CEO succession to cover today. So I'll kick off with an overview of Q3, but skip the normal customer commentary to allow time for the succession discussion. I trust that many of you had a good chance to interact directly with customers at a recent LiveWorks event, and I hope that'll carry you for a while. Starting with Q3 results then, I'm pleased to report that in Q3, PTC again delivered solid results. As you know, we feel that ARR and free cash flow are the best metrics to assess the performance of our business. In Q3, we exceeded our guidance on both metrics, And today we are again raising our full year ARR guidance midpoint as well as our full year guidance for free cash flow. As usual, I'll focus my discussion on constant currency results when discussing top line metrics, and Christian will outline currency effects later in the call. Starting with the top line metric of ARR on slide four, in Q3 we came in at 1.868 billion, which was above the high end of our guidance range. and up 25% year over year. Organic ARR growth accelerated slightly to 14%. ServiceMax contributed the extra 11 points of inorganic growth to bridge us to the overall 25% growth rate. We passed the one-year anniversary of acquiring CodeBeamer, so we're now counting CodeBeamer in our organic ARR results. Though the manufacturing PMIs continue to indicate a sluggish environment globally, Our top line ARR continues to show good resilience. In Q3, we saw broad-based ARR strength across all product groups and geographies, and our churn results remain good. Given strong year-to-date results, together with a solid pipeline and outlook for Q4, we're raising our full year ARR guidance midpoint. As I mentioned, Christian will provide the details later. Moving to slide five and switching to our bottom line view, we delivered 164 million of free cash flow in Q3 ahead of our guidance and up 46% year over year. Remember that ARR is the primary driver of cash flow. So this result was driven by a combination of strong ARR growth and higher operating efficiency. We raised our free cash flow guide for the year. Kristen will elaborate on that as well. Turning to slide six, let's look at ARR growth by geography. ARR growth in the Americas was 29%. In Europe, ARR growth was 24%, and in APAC, ARR growth was 16%. On a global basis, FX was neutral to our year-on-year growth in Q3, but regionally, FX continued to be a growth tailwind in Asia, whereas it's a growth headwind in Europe. All three regions benefited from inorganic growth to varying degrees due to the acquisition of ServiceMaxx. Speaking of ServiceMax, we saw our first cross-sell activity happen in the quarter. And while it's still quite early in the integration process, there is a nice cross-sell pipeline building, which bodes well for the future. Next, let's look at the ARR performance of our product groups on slide seven. In CAD, which is those products that enable authoring of product data, we delivered 11% ARR growth in Q3. and a market that's been growing an estimated 7%. Within these results, the growth was primarily driven by Creole, but supplemented by strong percentage growth in Onshape. PTC is clearly taking share in different parts of the CAD market with both products. In PLM, which includes those products that enable data and process management, our ARR growth rate in Q3 was 36%, or 16% organic, with the incremental inorganic growth coming from ServiceMax. In PLM, we continue to significantly outperform the market, which has been growing an estimated 8% in core PLM. ARR growth for PLM and Q3 was primarily driven by windchill, supplemented by strong organic percentage growth in ALM and SLM. Clearly, we're taking significant share in the PLM market as well. Turning to slide eight, I want to double click on our ARR growth strategy because we've been fielding many investor questions regarding how we've been able to perform so well on the growth front as compared to peers and whether this differential growth is sustainable. Some investors think we've shifted from one growth strategy to another over the years, but we see it very differently. In our view, we have consistently layered new growth strategies on top of existing growth strategies to create additional tailwinds that fuel faster growth. Let me explain. Our growth strategy starts at the bottom of the chart where we participate in CAD and PLM markets that are growing in the upper single digit range. So that is our baseline. On top of this, our products are very strong competitively, which has allowed us to take some incremental market share and outgrow our peers. Then back in fiscal 2014, we launched our IOT business, which will be more than 200 million of ARR this year and continuing to grow at a rate that's accretive to company growth. Perhaps the single biggest driver of growth was unleashed in 2015 when we launched the full-on transition from a perpetual and maintenance model to a subscription business model. This was a short-term pain for long-term gain type of strategy. and I'm pleased to say the pain bottomed out in fiscal 17 and faded in fiscal 19, and we've been enjoying the long-term gain in growth rate ever since. Simply put, a recurring model with sticky software creates much more growth than does a perpetual model, even at the same level of new seed sales. That's why companies like PTC crossed the valley of death to get there. You can refer to our FY21 investor deck where we took investors through the math model that shows how much easier it is to grow a sticky recurring business model than a perpetual one following that we put a strong focus on commercial improvements such as improved churn improved discounting and price optimization and then redoubled our efforts in these areas when we entered the covid and inflationary periods collectively these improvements have created incremental tailwinds to company growth rates and we think there's more to be done here going forward. We could have been satisfied and stopped there, but we didn't. We saw the CAD and PLM markets beginning to pivot towards SaaS, which led us to acquire the peer SaaS on-shape and arena businesses. These businesses continue to be growth tailwinds as their growth is accretive to PTC's overall growth rate. Then in fiscal 22, we decided to bring the SaaS phenomenon that was driving strong on-shape and arena growth to our core CAD and PLM business, which we did using the Atlas platform that leveraged Onshape technology. This strategy allows us to land larger ARR run rates because we're selling both the software and the service to deliver it. And of course, now we can expand the existing on-premise customer-based ARR run rates by shifting customers to SaaS and upselling to include the value of the delivery service the customer now gets from PTC. Frankly, this growth driver is in its early stages, and its impact is minor right now compared to what it promises to contribute in the coming years. Because we already enjoy strong growth independent of this SAS driver, you should consider that SAS is not our growth strategy per se. It's just another tailwind that helps in our quest to drive our growth rates higher. Finally, during fiscal 22 and 23, we made smart acquisitions like CodeBeamer for the ALM part of our PLM strategy and ServiceMax for the SLM part of our PLM strategy. On a standalone basis, these businesses are growing faster than PTC, and of course, these growth tailwinds will increase as we further develop the cross-sell synergies we're pursuing. Cross-sell is already becoming meaningful for CodeBeamer now, and looks very promising for ServiceMax, where we're still quite early in the process. So when an investor asks, what is driving the 14% organic growth that PTC is reporting this quarter? The answer really is all of it, except of course, ServiceMax, which is not yet factored into the organic calculation, but will be in a few quarters. For those who question whether this level of ARR growth is sustainable, I'd first like to point out that fiscal 23 will be the seventh consecutive year of double-digit ARR growth across good macro setups and bad, and indeed ARR growth has generally been accelerating over that time as more of these growth drivers came into play. I'd also point out that several of these drivers should be more impactful going forward, whereas none of them show signs of fading away. The sluggish macro no doubt has cost us a small amount of growth here in fiscal 23, but past history suggests we'll get it back when macro conditions improve. Bottom line is we feel very confident that PTC is positioned to deliver sustained double-digit ARR growth at or near the top of our peer group. Most importantly, please keep in mind that it is ARR, not revenue, that drives free cash flow at PTC. On the subject of free cash flow then, let's turn to slide nine where I'd like to double-click on the dramatic increase in margins that we've been driving, which raises similar investor questions of how and for how long. Our strong margin expansion, best measured using our operating efficiency metric, starts with the bottom four strategies we've been driving for many years. The first and biggest expansion driver has been the mix shift from professional services to software. Before this transformation, our revenue had a roughly 25% mix of low margin professional services, whereas currently we're at about 7% professional services mix on our way to a 5% mix thanks to the recent arrangement to sell a portion of our professional services business to ITCI in the form of DXB services. In turn, the large system integrator partner ecosystem we built has become a critical part of our growth strategy, as SIs help create software demand in order to drive demand for their own services. We've been backfilling the low margin services mix with high margin software all along, and by the time we get to our 5% services mix target, the cumulative effect of this mix shift will be about 10 points of margin expansion. We feel the negative impact to revenue growth from declining services revenue over the years has been more than justified by the positive impact of the higher profit software mix to our margins and free cash flow. Said differently, the quality of PTC's revenue has increased dramatically. At the next level, a second big driver of margin expansion has been our go-to-market improvements, which have dramatically increased the productivity of our sales force over the years. In particular, our development of a strong cross-sell muscle has been very helpful to sales productivity, and naturally we leverage this key strategy whenever we bring acquired products into the mix, like CodeBeamer and ServiceMax. The third big driver in this group is our R&D offshoring program, which allows us to maintain relatively rich resourcing against more moderate spending levels. We tend to have a higher degree of offshoring than peers, and we have consistently proliferated this strategy across our portfolio and into acquisitions that we make. On a non-GAAP basis, year-to-date R&D spending is around 16% of revenue, but R&D accounts for 37% of our employee base. Our largest offshore site is the PTC R&D Center in India that will celebrate its 30th anniversary next year. So you can see we have an incredibly deep pool of talent and expertise there. The fourth item to point out is the portfolio rebalancing. We do part as part of our planning every year to ensure that our resources are best positioned to drive growth while maximizing profitability. This strategy essentially boils down to driving low growth businesses at very high margins while driving moderate growth businesses at good margins, thus reserving sufficient dry powder to invest more aggressively to develop new high growth businesses like Onshape, all while retaining an attractive and expanding company margin profile. The next layer of the margin strategy is to leverage the benefits of scale that a recurring subscription business offers. Because growth in ARR requires relatively little growth in terms of variable costs, we've been doing a good job following our rule of thumb that on average our costs will rise at half the rate of ARR growth, helping to drive expanding margins year after year. The improving commercial discipline around churn, discounting, and price optimization that I previously mentioned as a growth driver is obviously a margin driver too, since our input costs are essentially the same independent of churn, discount, and price levels. The incremental growth we get here comes at nearly 100% margins. Finally, the changes we made in fiscal 21 to align our field organization to SAS organizational principles together with the operational rebalancing we did in fiscal 22 to better align spending with our growth outlook in IoT and AR have been big margin drivers because they've allowed us to meet incremental resourcing needs without incremental hiring. Our IoT business, for example, now has mid-teens operating efficiency margins while being accretive to company growth. Similar then to what I said about ARR growth, the significant margin expansion we're delivering here in fiscal 23 is really due to all of the above factors. In my view, these gains are fully sustainable with more to come in the future. As Christian and I have said previously, we expect our operating efficiency margin to expand to 40% by fiscal 25 and expect we can get to mid 40s longer term. So we continue to have a lot of runway here. Moving on to slide 10 then, I'd like to discuss our plans for CEO succession. I feel the company is in great shape in terms of top line and bottom line growth with multiple layers of initiatives that can sustain this performance well into the future. I trust you see we're continuing to demonstrate the resilience of our business as our growth powers on while PMI trends in the wrong direction. So for me, with more than 25 years under my belt now at PTC, half that time as CEO, I think it's a perfect time to think about putting a new generation of leadership in place that can sustain this high level of success well into the future. I love this company, and I'm very proud of all that's been accomplished during my time here, but life is calling me to a new chapter in following the succession I plan to retire from traditional management roles. PTC's board has given careful consideration to who should be PTC's next leader and how we could best transition this person into the role to preserve our strategy and momentum. Our board engaged Korn Ferry's CEO succession practice to determine what characteristics were most important in our next CEO, to vet our internal candidates, and to consider external candidates. That careful process led us to an ideal successor in Neil Barua, the former CEO of ServiceMax. Neil is smart and articulate, and he knows our industry. He's been a CEO twice already, yet still has a lot of career runway. He has a finance background, but really leans in with customers and product strategies. He's developed great followership within PTC already, and by the time Neil becomes CEO, he will have spent more than a year coming up to speed as a PTC insider. We are set up to have a seamless transition that offers complete continuity in the company's strategy and performance. So effective now, we've made a series of changes that initiate the transition process. I have been named chairman and CEO with plans for the CEO role to transfer to Neil on February 14th, 2024, which is the date of our next annual shareholders meeting. Neil has been appointed to the board and has been given the title of CEO elect. Neil and I will work together over the coming six months to ensure Neil has ample opportunity to get to know our important customer, employee, and shareholder constituencies, and to transition my knowledge, relationships, and responsibilities to him. Given that I'm a non-independent chairman by definition, the board has appointed experience director Janice Chaffin to be lead independent director. Neil will inherit and be surrounded by an excellent team that fully supports him. Mike DiTullio will continue to head our operations as President and COO. Christian Talvedy will continue to head our financial strategy as CFO. Likewise, other PTC executives such as our Chief Product Officer, Chief Technology Officer, Chief Strategy Officer, Chief Legal Counsel, and Chief Human Resources Officer will remain in place throughout the transition and beyond. This transition should be very smooth. The bottom line is that the board chose a great successor whom I fully endorse and who has the support of the entire team. I'm very happy for Neil and for myself, I might add, that we could find such an elegant way to transition PTC leadership into what promises to be an exciting and successful next phase for the company. With that, I'd like to turn to slide 11 and ask Neil to spend a few minutes introducing himself before we move back to Christian for additional commentary regarding results and guidance.
spk06: Neil? Thanks, Jim. Hello to everyone listening. It's great to be on the call today. PTC is a terrific company and it's an honor to be named PTC's next CEO. I want to thank the board for running a thoughtful succession planning process and for the vote of confidence they placed in me. I've learned a lot about PTC since the ServiceMax acquisition seven months ago. And I'm excited to continue learning from Jim, Mike, Christian, and the rest of the leadership team during the transition period. I want to personally thank Jim for all he has done for PTC, for setting things up so well for me and the team, and for the friendship that we've built. For those on the call who don't know me, I've been in the tech industry for nearly 25 years. I was CEO of ServiceMax for about four years before the acquisition by PTC. Prior to that, I was CEO of IPC Systems for four years. Prior to IPC, I worked in the technology PE space as an operating executive at both Silverlake and Francisco Partners. PTC is in a terrific position, and my top priority is continued execution. Over these last six months, I've seen firsthand how excited our customers are about our model-based, closed-loop digital threat strategy and how critical our software is for their digital transformation journeys. I've also observed the talent and passion of our employees, and the commitment they bring to our customers and partners. There's no other company like PTC, and I can't wait to roll up my sleeves and help take it to the next level. Over the next several weeks and months, I will be meeting and spending more time with our customers, employees, partners, and investors. I'll be joining many upcoming investor and analyst meetings with Jim and Christian, and I look forward to meeting you. Jim, thanks again to you and the board. Over to you, Christian.
spk05: Thanks, Neil. And let me start off by reiterating Jim's ringing endorsement. It's been great getting to know you, and I'm looking forward to working with you to drive customer and shareholder value. Turning to slide 13, I'd like to note that I'll be discussing non-GAAP results and guidance, and ARR references will be in both constant currency and as reported. In Q3 23, Our constant currency ARR was $1.89 billion, up 25% year-over-year and above the high end of our guidance range. On an organic constant currency basis, excluding service max, our ARR was $1.7 billion, up 14% year-over-year. In Q3, our as-reported ARR was $61 million higher than our constant currency ARR. On a year-over-year basis, currency fluctuations were neutral to growth in Q3. As Jim explained, our solid top line in Q3 was broad-based across all geographies and product groups. I'm sure many of you have been following the manufacturing PMIs due to the historical correlation with our top line when we operated a perpetual business model many years ago. The global manufacturing PMI peaked in December 21, and has been under 50 for almost a year now. The Eurozone PMI has been particularly weak. In contrast to those trends, our top line, including in Europe, has continued to grow. Our subscription business model and low churn rates make our ARR resilient, and demand for digital transformation continues across our customer base. In Q3, our ARR benefited from some timing, which we factored into our guidance for Q4, Naturally, we also took the outlook for bookings, churn, start dates, deferred ARR into account when we raised the midpoint of our fiscal 23 ARR guidance range. Moving on to cash flow, our results were strong with Q3 cash from operations of $169 million and free cash flow of $164 million coming in ahead of our guidance. This performance was driven by continued strong execution based on our foundation of solid collections and cost discipline. In addition, we had a net timing benefit of approximately $5 million in Q3. So keep that in mind as we go through our Q4 cash flow guidance in a few minutes. When assessing and forecasting our cash flow, it's always good to remember a few things. The majority of our collections occur in the first half of our fiscal year. Q4 is our lowest cash flow generation quarter. And on an annual basis, free cash flow is primarily a function of ARR rather than revenue. Q3 revenue of $542 million increased $80 million or 17% year over year and was up 21% on a constant currency basis. In Q3, recurring revenue grew by $83 million, partially offset by a $3 million decline in professional services revenue. The decline in professional services revenue is consistent with Jim's mixed conversation, including our strategy to transition some of our professional services revenue to DXP services, our partner for Windchill Plus lift and shift projects. As we've discussed previously, revenue is impacted by ASC 606, so we do not believe that revenue is the best indicator of our underlying business performance. but would rather guide you to ARR as the best metric to understand our top-line performance and cash generation potential. Moving to slide 14, we ended the third quarter with cash and cash equivalents of $282 million. Our gross debt was $2.365 billion with an aggregate interest rate of 5.6%. During Q3, we paid down $180 million of debt, and at the end of Q3, we had $1 billion in high-yield notes, a $500 million term loan, and approximately $245 million drawn on a revolver. We have a second payment for the ServiceMax transaction due in October 23 of $650 million, of which $620 million is already reflected as debt on our balance sheet. and $30 million of imputed interest will be reflected in our Q1-24 cash flow. We intend to fund this payment with cash on hand and our revolving credit facility. The deferred payment is included in debt on our balance sheet, as I just mentioned, and is factored into our debt to EBITDA ratio, which was three times at the end of Q3. We expect to be at or below three times levered by the end of Q4 and below three times levered throughout fiscal 24. Given the interest rate environment, we continue to prioritize paying down our debt in fiscal 23 and fiscal 24. We've paused our share repurchase program and expect our diluted share count to increase by approximately 1 million shares in fiscal 23. We expect to have substantially reduced our debt by the end of fiscal 24 and will then revisit the prioritization of debt pay down and share repurchases. Despite this interruption, our long-term goal, assuming our debt to EBITDA ratio is below three times, remains to return approximately 50% of our free cash flow to shareholders via share repurchases, while also taking into consideration the interest rate environment and strategic opportunities. Next, slide 15 shows our ARR by product group. In the constant currency section on the top half of the slide, we use FX rates as of September 30, 2022 to calculate ARR for all periods. You can see on the slide how FX dynamics have resulted in differences between our constant currency ARR and as reported ARR over the past seven quarters. Based on exchange rates at the end of Q3 23, our as-reported ARR at the end of fiscal 23 would be higher by approximately $64 million compared to the midpoint of our constant currency guidance. We report both actual and constant currency results, and FX fluctuations can have a material impact on actuals. but remember that we provide ARR guidance on a constant currency basis. If exchange rates fluctuate significantly between the end of Q3 and Q4, the impact to our as-reported ARR would also change. We believe constant currency is the best way to evaluate the top-line performance of our business because it removes FX fluctuations from the analysis, positive or negative. With that, I'll take you through our guidance on slide 16. For all ARR guidance amounts, we are using our constant currency FX rates, which again are as of September 30, 2022. For fiscal 23, we expect constant currency ARR of 1.935 to 1.95 billion, which corresponds to constant currency ARR growth of 23 to 24%. We raised the low end of our guidance by $10 million, so the midpoint of our ARR guidance is up $5 million. On cash flows, we are again raising our fiscal 23 cash flow guidance. We're now targeting cash from operations of approximately $605 million and free cash flow of approximately $585 million. As I pointed out last quarter, I think it's worth highlighting that we're raising our cash flow guidance for the year, while we have also been increasing investments in select growth opportunities for our business in the back half. The important point is that the resilience of our business model enables us to maintain core long-term investments, even in a turbulent macro environment. In addition to that as a baseline, We adjust shorter term investments accordingly, given our business performance and outlook. The result is solid and consistent cash flow growth. We maintain consistent billings practices, and we've optimized our processes around billings and payments over the past two to three years. Because of this, the quarterly seasonality of our free cash flow results has been very consistent over the past two years. and we're on track to deliver similar quarterly linearity in fiscal 23 as well. For Q4, we're guiding to free cash flow of approximately $42 million. We expect approximately $2 million of CapEx in Q4 and therefore our cash from operations guidance is approximately $44 million. Note that we made acquisition and restructuring related payments of $11 million through the first three quarters of the year. of which $3 million was paid in Q3, and we plan $11 million of payments in Q4, which we've also factored into our free cash flow guidance. Going forward, we also plan to provide full year and quarterly guidance for both revenue and EPS. We continue to believe that revenue and EPS are not good measures of our business performance, And internally, we look at ARR as our primary top line metric and free cash flow as our primary bottom line metric. That said, the public scorecard is still often revenue and EPS. And while we have consistently met or beat on ARR and free cash flow over the past few years, we sometimes score a miss on revenue or EPS against metrics that we've not even guided to quarterly. So now we're going to start guiding to both revenue and EPS on a quarterly basis. The EPS ranges we're providing are aligned with our revenue guidance ranges, which appropriately allow for a broad range of outcomes given ASC 606-related dynamics. For fiscal 23, we've narrowed our revenue guidance range, and primarily due to FX fluctuations, we lowered our revenue guidance midpoint by $5 million. Our fiscal 23 revenue guidance range is $2.09 to $2.12 billion, and for Q4, we're guiding to $540 to $570 million. As a reminder, ASC 606 makes revenue fairly difficult to predict in the short term for on-premise subscription companies. More importantly, Revenue does not influence ARR or cash generation, as we typically bill customers annually upfront regardless of contract term length. Moving on to EPS, for fiscal 23, we expect GAAP EPS of $2.14 to $2.45, and non-GAAP EPS of $4.07 to $4.38. For Q4, Our guidance range is 47 cents to 77 cents for GAAP and 95 cents to $1.25 for non-GAAP. Since revenue is impacted by ASC 606, it's important to remember that earnings per share is also impacted. Now that I've taken you through our guidance, let's quickly review how our guidance has progressed this year on slide 17. First, looking at ARR, as you'll recall, When we began fiscal 23, we had a constant currency ARR growth range of 10% to 14%, given the uncertain macro environment. There's no doubt that we're operating in a difficult macro backdrop. But even still, we've been able to deliver solid results, taking the low end up every quarter this year. And now with our fiscal 23 ARR guidance midpoint, is for 13 percent constant currency organic constant currency growth as we begin to think about next year while we're not guiding fiscal 24 at this point i think it's safe to assume that we will weigh our end market opportunity pipeline momentum and also try to consider the macro environment at the time assuming the current macro environment continues I would not be surprised to see an ARR guidance set up similar to this year going into next year. And much like this year, I would think that we would expect to deliver a free cash flow result within our previously guided fiscal 24 range, regardless of the ARR outcome for the year. In a more favorable environment, we'll be more judicious with our spending. And in a more favorable top line environment, we are likely to invest more in the business. Because of the stability of the business model, we have a lot of room to match run rate top line inflows, our cash generation, with run rate expense investments, which are primarily headcount and COGS expenses related to SAS delivery. I think we have proven that we will actively manage our investments in line with the macro and business momentum we're seeing. Looking at our free cash flow guidance progression, we've been able to raise our guidance every quarter this year. We started the year guiding for 35% free cash flow growth, and we're now guiding to 41% growth. Turning to slide 18, here's an illustrative constant currency ARR model. You can see our results over the past seven quarters, and the column on the right illustrates what's needed to get to the midpoint of our constant currency ARR guidance for Q4 of fiscal 23. Because our ARR tends to see some seasonality, the most relevant comparison is the sequential growth in Q4 of 22. The illustrative model indicates that to hit the midpoint of our Q4 23 guidance range of $1.943 billion, we need to add $75 million of ARR on a sequential basis. This is a million less than the 76 million we added in Q4 of fiscal 22. All things considered, we believe we've set our constant currency ARR guidance range prudently. Summarizing then on slide 19, first, we have a strong portfolio and strategy. This year, we've expanded our clear category leadership role in PLM. which has become a technology backbone for digital transformation at industrial companies. The addition of ServiceMax further extends what was already a unique portfolio of interconnected digital thread capabilities across the full product lifecycle. Second, our strong execution with organic growth at double digit levels already. We're in the early days, but executing well against a major on-premise to SaaS transformation that should provide a multi-year growth tailwind. And as Jim explained, it's a massive oversimplification to focus only on SaaS as the growth driver for PTC. We continue to benefit from the cumulative layers of PTC-specific growth drivers, including driving customer expansion through cross-selling our unique portfolio. Third, We have a well-earned reputation for driving margin expansion that goes back more than a decade. We've been demonstrating that we're judicious with our investments, being mindful of both long-term opportunities and near-term macro uncertainty. From a cost and operational perspective, we're lean and a continuous improvement mindset is part of PTC's culture. Fourth, With the organic ARR growth in the low teens juxtaposed against PMIs that are generally in the mid 40s, I trust you would agree that we're actively demonstrating that our business model is very resilient. Our top line growth and bottom line profitability are approaching peer leadership levels. And finally, we're led by a team that has deep expertise and a proven ability to drive growth and margin expansion. For sure, the environment around us will continue to change, and we will continue to adapt accordingly while still pushing the envelope of what we can do for our customers. We're continuing to make progress towards our midterm guidance targets. In a challenging macro environment, we've been able to deliver solid ARR growth year-to-date in fiscal 23. We have confidence in continued double-digit ARR growth and our free cash flow target for fiscal 24, despite the macro uncertainty that continues to persist. We feel good about our midterm growth aspirations and cash flow targets as well. With so many positive trends going our way, we continue to believe PTC has a tremendous opportunity to continue to drive shareholder value. So with that, I'll turn the call over to the operator to begin Q&A.
spk11: At this time, if you would like to ask a question, please press star followed by the number one on your telephone keypad. We ask that you please limit yourself to one question only. If you have additional questions, please return to the queue. Thank you. Your first question comes from the line of Jason Salino with KeyBank Capital Markets. Your line is open.
spk18: Hey, guys. Lots to unpack here. Jim, it looks like we have a couple more quarters with you. So I guess this isn't goodbye yet. And Neil, looking forward to working with you as well. But I guess my question will go to Christian. But to clarify, I think you said similar guidance framework for entering 2024 on how you kind of entered 2023. So maybe can you just elaborate on this a little bit more? Because I know you entered this year with 12% guidance midpoint. Thanks.
spk05: Yeah, so, hey, Jason, first of all, and thanks for the question. You know, I think the point that we're making without really guiding for fiscal 24 yet, let's get through 23 and actually see what the macro looks like and what the, you know, what the pipeline and everything actually continues to shape up to looking like. But, you know, we provided a fairly wide guidance range, 10 to 14%. as we started fiscal 23 that allowed for a considerable amount of macro uncertainty. We've certainly seen that, and I think that we would look for a – I wouldn't be surprised to see a similar setup as we start next year.
spk14: Yeah, I think as we reflect on it, how we guided and how the years transpired, we're pleased with the guidance. We're pleased with how resilient the business was. we're pleased with the fact we've been able to ratchet the guidance up. It feels like that was a good approach.
spk02: Great. No, that's very helpful. Thank you.
spk11: Your next question comes from the line of Matt Hedberg with RBC Capital Markets. Your line is open.
spk15: Great. Thanks for taking my questions. Congrats, Jim. 26 years, quite a run. Neil, look forward to working with you more closely. And yeah, I guess, Jim, we do get you for a few more quarters. So, That's good as well. I had a question on Creo Plus. Obviously, it just launched. I'm curious on some of the initial customer feedback. And really then, once you start to get more data, do you suspect that we'll see similar upsell to what you're seeing with Windchill Plus, which I believe is somewhere in the neighborhood of 2x uplift?
spk14: Yeah, Christian, why don't I take the first half of the question, the customer reaction, and you take the uplift part? So, yeah, we have, I'd say, good momentum out of the blocks. I mean, in the first quarter, introducing it in the middle of the quarter, we didn't expect to necessarily do a lot of business. But actually, our first order came from a customer who was at LiveWorks and said, wow, that's kind of what we're looking for. And that's a customer, incidentally, who had multiple CAD systems right now and was planning to standardize on one. Kind of had a preference for Creo and then came to LiveWorks and said, what we really want is Creo Plus. So that's an example of a relatively short sales cycle from a company who was pretty impressed with the technology and some of the advantages it brings. So I think the reaction is good. I mean, it's very, very early. And so we shouldn't get ahead of ourselves. But it's always good to get out of the blocks fast. And I feel like we did with Creo Plus in the quarter.
spk05: Yeah. And hey, Matt, just back to your question on the uplift. We would expect, you know, obviously an uplift for Creo Plus as well, although I don't think it's going to be quite the 2X. It'll be a little bit less than that, you know, out of the gates somewhere, you know, probably somewhere closer to, I don't know, 1.7-ish, maybe 1.7, 1.8, somewhere in that ballpark.
spk02: Thanks a lot, guys. Congrats again. Thank you.
spk11: Your next question comes from the line of Steve Tusa with JP Morgan. Your line is open.
spk17: Hey, guys. Good evening. Hey. Congrats to both of you, Jim and Neil. Jim, didn't work with you for very long, but quite a run for sure.
spk02: Well, thank you.
spk17: Not all Christian. Christian, I didn't see any disclosure like last quarter on bookings and churn. Can you give us a bit of an update on those metrics to the extent you can?
spk05: Hey, Steve. So actually, you know, we're trying to stay focused on ARR and free cash flow and really ARR and sequential ARR and thinking about that framework. You know, the trick with bookings is there's so many different dynamics to it that you just got to keep peeling back layers and layers and layers. And, you know, to be honest, it all nets out in the ARR number and the ARR guidance anyways. So, you know, I mean, as we evolve this, you know, this guidance process, you know, I think you'll remember what we said last year about or last quarter about expectations. and where we think that would land us for the full year. Obviously, now we took the low end up for the full year. We mentioned some timing issues. You obviously saw that we beat the sequential ARR or the ARR guidance for Q3. So I think all that nets out in how we're feeling about the business and the pipeline. from that perspective.
spk17: And I guess the 11 to 14 you mentioned as like a good framework, is that an organic constant currency metric that you're talking about?
spk05: Yeah, it was actually 10 to 14. And yes, that would be organic constant currency.
spk17: Okay. And then one last one, just on the new guidance for EPS and revenue, that was something that you guys chose to do, not something that you know, I don't know, that was something like more of an IR kind of strategic discussion as opposed to something else?
spk05: Yeah, that's exactly right. You know, I mean, again, really, the way that we look at the business is ARR and free cash flow. Revenue is very volatile, not necessarily for performance reasons, but for accounting reasons. And it really doesn't tell you anything about the performance of the business in any given quarter or even trended just because varying term lengths cause so much volatility that you actually can't really use revenue and therefore really the full P&L as a barometer of business performance. But that said, we also recognize that the investment community, when doing comparative analysis and so on, does actually still refer to revenue and EPS. And as I said, there's a scorecard out there, and we look at the ARR and free cash flow scorecard and say, hey, great, we're actually doing good. We're meeting or beating expectations. And then on revenue and EPS where we don't provide quarterly guidance and everybody's left up to their own devices to, you know, to divine, you know, what that might be on a quarterly or quarterly basis for revenue and EPS. You know, sometimes we miss on the scorecard. We score a miss. And so we're really just trying to be more proactive about that and provide some, you know, provide some of our color to everybody.
spk14: Just if I could kind of reiterate some points. We don't think these are meaningful metrics. We prefer not to miss them anyway. So we're going to give you some guidance. We're going to give you some guidance to help you set your targets in the right place. Jim's always much more.
spk17: Makes a ton of sense. Makes a ton of sense. Congrats to all you guys again. Thanks.
spk11: All right. Thank you, Steve. Your next question comes from the line of Matthew Broom with Mizuho Securities. Your line is open.
spk03: Thanks very much. And, you know, congratulations to Neil on your appointment and, of course, to Jim on your retirement. You'll certainly be missed. In terms of the timing benefits to ARR, just how big was that benefit and what was the reason for that?
spk05: Hey, Matt. It's Christian. Uh, so, uh, uh, the, the timing benefit was, uh, you know, it was a few million dollars and it just has to do with when contracts, uh, are actually getting signed is, is, is basically what it boils down to. You know what I mean? The deals are being worked for, you know, in many cases, many months. And, uh, you know, it just has, has to do with, has to do with that really.
spk14: Yeah. I mean, it's, it's this start date phenomenon that Christian always talks about, um, Sometimes it's pretty typical that we sign a contract in this quarter. Sometimes it starts in this quarter. Sometimes it starts next quarter. Sometimes it then ramps or not. So just what we call in-quarter starts, if it started in Q3 rather than Q4, well, it helped Q3, but then it came out of Q4. So that's really what we're talking about.
spk03: Got it. And then, sorry, if I could just maybe quickly ask, just in terms of this year's constant currency organic ARR growth guidance of 13%, how sustainable is that level of growth sort of going forward into FY24?
spk05: Yeah, I mean, again, we're not really going to guide fiscal 24 at this point, but we have, you know, mid-teens growth aspirations uh over the midterm you know i think that jim did a great job kind of outlining a lot of the various growth drivers uh that help stack up to uh you know delivering on that that kind of growth then you have to overlay the macro and understand you know how that's impacting in any given period uh you know but as we said i i'd be surprised if if we had a i wouldn't be surprised if we had a similar you know, guidance set up to last year. So we think that, you know, whatever low to mid-teens growth is sustainable.
spk02: All right. Thanks again.
spk11: Your next question comes from the line of Adam Borg with Stiefel. Your line is open.
spk01: Awesome. Thanks so much for taking the question. Maybe just on the macro, Jim, I know you didn't want to talk or Christian didn't want to talk today.
spk14: explicitly around bookings trajectory in the quarter but maybe we talk a little bit more about the macro overall how sales cycles change in the quarter and any changes by geography or vertical um yeah i think we talked about it i mean i think at a high level you know in the past several quarters three quarters probably we've talked about uh smb being a challenge uh china being a challenge uh i think that continues uh, you know, particularly pockets of SMB, you know, our, our arena business is not at the growth level it was previously. Um, but that's not new news. That's kind of been here for multiple quarters already. Um, and I think in Europe, we're actually surprised at how well we're doing given, you know, some of the macro data points, the PMIs, uh, stuff like that. So, um, it's sort of the same story as before, you know, inside a uncertain environment. there's a few pockets of weakness. Most of the, most of the geos and products are kind of doing just fine. And then there's some real pockets of strength too. You know, like we've said before, uh, aerospace and defense, for example, happens to be a pocket of strength. Uh, um, medical device happens to be a pocket of strength. So, you know, it's, it's kind of a mixed bag. Um, I think it nets out for the year to, uh, less favorable than I want to be. And, you know, I said, we did slow down a bit. I mean, we actually did last year with 15% growth and, uh, And this year at the midpoint, we're calling 13, but the year's not over. So, you know, it could be we lose a point, point and a half of growth this year, two points maybe, I don't know. But I tell you what, that's pretty darn good in this environment. And it's certainly better than any of our peers are able to do in this environment. So we feel proud about it and feel confident going forward that this is a very growth-oriented, sustainable, resilient business. And it's not likely to change dramatically from that. And one other thing I'd say, we've also experienced in the past that when there's a slowdown, for example, in some of these pockets, like let's say arena, when the environment improves, we get a surge as all that business comes trickling in now because people have authorization to go forward with this project they've had sitting on the shelf for a while. So we saw this in 2009. We saw it in 2020. In 2020, Q2 and Q3 were pretty weak, and we had a blockbuster Q4. We kind of made up for all of it. So I also think our view is probably when the environment improves, and I'm not sure when that will be, probably we'll get a surge of strength as some of these projects that have been held back by the customers get funded again.
spk17: Great. Thanks so much.
spk11: Your next question comes from the line of Jay Vlieschauer with Griffin Securities. Your line is open.
spk09: Thank you. Good evening. Jim, Neil, one of the interesting things about your closed-loop lifecycle management strategy is the multiple forms of associativity across the product line. And with that in mind, and at the risk of asking which of your children do you favor the most question, what do you think is the next big thing in closed-loop lifecycle management? Is it PLM and ALM, PLM and SLM. Is it perhaps CAD and simulation and SPDM or all of the above? But how do you think about where the next big thing in terms of incremental growth or share might be? And then if I could just add to that, related to share, it's been demonstrable that you've gained share in your two biggest businesses, CAD and PLM. But SLM and ALM are smaller, arguably more fragmented businesses. So how do you think about gaining share in both of those?
spk14: Yeah, I think I'll take that one, Jay. It's probably not fair yet to pin that one on Neil, but maybe on the next call. But for this call, I'll take it. So I think, first of all, I don't want to pick one thing. And that's kind of a message here is it's not like there's one good thing happening at PTC. There's a whole stack of good things. But nonetheless, I think you would agree. we have a very strong PLM position and we've been taking share for years with PLM. In fact, you know, you suggested went from, from third place to second place. And then I think we've gone to first place. Uh, so, um, PLM is a strength and I don't see that dying anytime soon. Now that said, we acquired a real strength in ALM, uh, with Goldbeamer and that is a hot market. you know, particularly in some places like automotive, which is a massive industry. I think most of you know there's three to four software engineers per mechanical engineer in automotive development right now, you know, across all companies. So that's a hot place to be, and we have a hot product in CodeBeamer. And then I'd say in SLM, you know, we have an offering that's pretty much unmatched, and particularly so when you take ServiceMax, you know, the strategy we outlined at LiveWorks. ServiceMax with Arbortext, with Servagistics, with ThingWorx IoT, with Vuforia AR. There's just nothing to go against that, frankly, and certainly not anything model-based, closed-loop lifecycle. I mean, the nearest thing we could point to in a competitor there would be like IFS, which is kind of a Swedish mainframe company. not really the Silver, Siemens, or anybody like that. So I think we have some real strengths, but, again, I don't think there's one. I think we have a portfolio of advantages we've been developing and will play out in our favor.
spk09: Okay. So, Jim, given your long tenure, I was going to ask you about something you mentioned to me in 1999, but I bet it can wait. We'll save it for next time.
spk14: Yeah, Jay, my tenure is almost as long as yours.
spk09: Great. Thanks, guys.
spk11: Yeah, thank you. Your next question comes from the line of Joshua Tilton with Wolf Research. Your line is open.
spk07: Hey, guys. Thanks for sneaking me in here, and congratulations to both of you. Jim, you mentioned you have a hot product with CodeBeamer. We keep hearing nothing but positive things. Any chance you could just give a little bit more color on how it performs in the quarter? And, you know, I understand that it's officially organic, but Christian, maybe just any sense for how it contributed to ARR this quarter and what you guys are baking in for its contribution in 4Q. Thanks.
spk14: Yeah. So, I mean, at a high level, we had a previous offering called Integrity, which, you know, had aged, let's say, over the years. And CodeBeamer is a much newer offering. kind of cutting-edge product. It's got great functionality, great usability, supports all the Agile principles that embedded software developers also want to adopt now, but at the same time provides the regulatory framework that they need to develop against. So it's a great product. I think it's best in class, and it's a hot market. So we've been doing very well with these big auto companies that you would all know the names of. And I think we're going to land a few more here in the coming quarters. But it's certainly been a creative. I said last quarter, if you remember, that we had 13 percent growth. But, you know, if you'd let me look at CodeBeamer a little differently, it had been 14. And now this quarter is 14. So you see that CodeBeamer, while not a big business, is performing well enough to lift the organic business up by, you know, as much as as much as 100 basis points.
spk11: Your next question comes from the line of Ken Wong with Oppenheimer. Your line is open.
spk04: Great. Thanks for sneaking me in as well. So this question, I'm not sure if it's kind of appropriate at this stage, Neil, but Jim's established a pretty well-deserved reputation for delivering on cash flow and EPS in a past life. I guess as you kind of think about your background, how you look at the business, would you characterize yourself as having more of a growth or margin tilt?
spk06: Ken, thanks for the question. I appreciate it. And, you know, as way of backdrop and a reminder, I've been at PTC getting myself very much embedded here for the last seven months. And so spending meaningful time here in Boston, moving the family out in the next few weeks out here. So I've got a good, the point being, I've got a really good context so far of the business. Clearing this transition with all the great things Jim's done with this great executive team, I'm going to get to know the business a lot better. But that being said, I've been part of the framework with the executive team building the near-term and long-term plans for the business and feel really confident about what we have put forward based on the momentum, based on what I see. I am very much supportive of how KT has put together is free cash flow framework around the levers we have around the resilient business and the layer cake growth opportunities we have that Jim articulated. So from a perspective of me being new, it's actually me having spent meaningful time here, making sure I was comfortable with the things that we heard on the call and the go forward perspective of the business. So feel good about that with the layer cake growth strategy, as well as a very disciplined approach to make sure free cash flow is something we stay very much focused in on.
spk14: And I can add, to give him some kudos here, he's ahead of plan on the free cash flow of ServiceMax. So he gets it. I mean, you know that cash flow comes from growth and careful application of spending. And he's ahead of plan.
spk05: Ann demonstrated the EQ not to answer the previous question about which of Jim's children do you like the most.
spk04: Appreciate the insights, guys.
spk11: Your next question comes from the line of Daniel Jester with BMO Capital Markets. Your line is open.
spk16: Great. Thanks for taking my question. So congratulations on the first cross-sell of ServiceMax, which I suspect on a different call might have been highlighted more in your opening remarks. Maybe you could just spend a minute sort of providing a little more context on how that deal came together And as you think about accelerating the cross-sell opportunity, any sort of learnings or strategic adjustments you've made as you've got this first deal across the door?
spk06: Thank you. Great question. And the children over time will be constructively across the whole digital thread. But in this regard of ServiceMax and SLM, the cross-sell value that we're seeing and the momentum that we're building and a material deal that we closed out this past quarter, was an evolution of a already significant customer of PTC for a number of years. And quite frankly, for the last three years, we've been trying to win it as a standalone business at ServiceMax. When we put the companies together, went through LiveWorx and explained the model-based closed-loop digital thread strategy with PLM and SLM, the things that we could do to provide value for the customer, it was a no-brainer and there was no competitor that the actual industrial manufacturer out of Europe here had a choice to actually go to someone different. And so that thread and what we're doing to answer your second part of your question is across the collective customer base that has PLM and all the other categories that PTC has sold, we're actually integrating in the SLM portfolio and really showing the customer value. And we've only started, as Jim mentioned, again, a material deal, and we feel confident that we're building the right pipeline and the energy around the customer really seeing a differentiated offer across this closed loop that we've been articulating as our strategy.
spk14: Yeah, and I think that one was fortunate because LiveWorks made the light bulb come on, and then we had a very short sales cycle. So I certainly hope we can have other such short sales cycles. That's atypical. But I think the light bulb went on for a lot of companies at LiveWorks. You know, there's a lot written about it if you've seen that. So it was great support for the concept of, you know, the physical and digital, the closed loop, you know, model-based closed loop product lifecycle management concept. So I'm very optimistic, and there are numerous deals in the pipeline. They just didn't happen to close quick enough to get done in the quarter. Great.
spk02: Thank you very much.
spk11: Your next question comes from the line of Saket Kalia with Barclays. Your line is open.
spk13: Awesome. Hey guys, thanks for taking my question here and congrats Jim and Neil on your respective next phases. Thank you. For sure. Listen, most of my questions have been answered, but maybe one for Christian. Anything to note on pricing here, Christian? I know the last couple of years have been responsive to the macro backdrop, right? Like, you know, not necessarily, you know, using that as much during tough times, also responding with inflation during more inflationary times. Anything to note more recently on pricing or how you're thinking about pricing going forward?
spk05: Yeah. Hey, Sackett. Thanks for the question. You know, I mean, I do think, you know, as the. CPI continues to trend down, you know, and we start to see a little bit more stability in the overall macro environment. That will also be reflected in pricing strategy. So, you know, I would expect that we would see normal, you know, kind of normal price increases, you know, again, absent some abnormal, extremely abnormal, you know, macro situation. But that's what I, you know, I would expect we'd start to see more normalized pricing action. Similar to what we did, you know, similar to what we've done prior to COVID.
spk02: Understood. Thanks, guys.
spk11: Your next question comes from the line of Andrew Obin with Bank of America. Your line is open.
spk08: Yes. Hi, how are you guys?
spk11: Good.
spk08: Hey, Jim Neal, congratulations on the transition.
spk02: Thank you.
spk08: Just a question. You know, I know you guys have a number of AI offerings, I think, for your generative AI design. I think Vuforia Expert Capture, I think, uses some AI. I think AI Within Things works. You've had this for a while. Are you getting more customer inquiries, you know, given we're in this AI news cycle, and is this enough to start moving the needle?
spk14: Yeah, you know... I don't think it's ready to be a layer in the layer cake yet, Andrew, but it could head that way. Because certainly there's a lot more industry buzz, a lot more people saying, what should we be doing? A lot of engineers saying, what does AI mean to engineering? And there's a lot of work going on at PTC, as you would expect, saying, what else could we do? And of course, there's two dimensions of that. What can we do in our products that would create more value for our customers? And then secondarily, what can we do in our operations that would make us more productive? So there's a lot of things happening here. And then we do have these three capabilities in the market already. So I don't think that deserves yet to be a layer in that layer cake of growth drivers. But, you know, hey, let's try to develop it into one. I know that's on Neil's list.
spk08: Excellent. And just a follow-up question. What areas have you been adding incremental spending year to date?
spk05: Hey, Andrew, it's Christian.
spk08: Hey, how are you, Christian?
spk05: Good. So if you're referring to the comments that we were, you know, talking about kind of increased investment in the back half in growth drivers, you know, that's been primarily in, you know, continued investment in Windchill Plus, in CodeBeamer, you know, in particular to name a couple.
spk08: Excellent. Thanks a lot.
spk11: Your next question comes from the line of Nays09 with Berenberg. Your line is open.
spk00: Hi. Thanks for taking my questions. And like everyone else, congrats to Jim and Neil for your upcoming roles. If I could start with a question on how you mentioned that we're seeing the weakening macro numbers in the global manufacturing PMIs. know when if if and when we you do start to feel the pressure uh from those declining macros in which aspects would you start to when you first feel the pressure would it be in new business or would it be when you renew contracts customers are committing to a lower level of contract values than what you would have expected them to and then in terms of you know growth percentage points
spk14: how much would be at risk if um we started to see macro pressures in the performances yeah i think uh maybe i'll try to stab christian you can help so uh so i mean the the factors that build up ar are you know fundamentally bookings and churn but we leave deferred and all that stuff out of the discussion for a minute um we've seen no evidence of increased churn in bad macro environments. We did not see it in 2009, we did not see it in 2020, and we have not seen it this year. So I just feel like our software, when it goes into production, has always stayed in full production in terms of, at least anyway, churn rates being the same. So I'm going to take that off the table. There's no data through three down cycles to suggest that's vulnerable. Um, and then as you go to bookings, I mean, we've been clear, we've already seen some pressure in pockets. And, uh, and when Christian said, uh, some time ago that we, our expectation was flat organic bookings for the year. Well, you know, we had probably hoped to do better than that. So, um, I think, I think that's where we'd feel the pressure. Um, but again, we gave some scenarios a year ago when we guided this 10 to 14 and said, you know, we can actually withstand. quite a bit of bookings pressure and still deliver some pretty impressive ARR results. And off that, some pretty impressive free cash flow numbers. So again, the business model is quite resilient, and it's because it's a recurring model with a low churn rate, I mean, fundamentally. So you can go back and review that guidance. We're not really trying to guide the next year here, but I think that the low end of the scenario was 30% bookings decline, which... which kind of matched more or less what we saw in 2009, but of course the metrics were a little bit different then. But anyway, you know, we sort of feel like even in a difficult environment, we can post some peer-leading growth rates and off that, you know, peer-leading free cash flow growth rates because of the nature of the business.
spk05: Yeah, I mean, we're in a difficult environment right now. You kind of hit on that point.
spk00: That's amazing. Thank you very much. Particularly helpful.
spk11: That is all the time we have for questions. I'd like to turn the call back to Jim for closing remarks.
spk14: Okay, great. Well, thank you all, and thank you for the kind comments for both Neil and myself. We appreciate that. A lot of news here. We're going to be quite active on the investor relations circuit here over the next quarter, this current quarter, starting with callbacks, which Neil and I will both participate in. We're planning to be in New York Tuesday of next week. We don't have the details quite nailed down yet, so look for an email from Matt, Shamal. And then PTC people, various different people are going to attend the KeyBank Virtual Roadshow on the 31st of July. We're going to the KeyBank Annual Technology Leadership Forum in Vail on August 7th and the 28th. We're going to be at the Stiefel Tech Executive Summit in Deer Valley. And we're going to as well be at the Citi 2023 Global Tech Conference in New York City on September 6th. So you'll have ample opportunities to talk to us. We're looking forward, you know, lots of good stuff happening in the business. We think this CEO succession is good and healthy and careful and will be continuous. And everybody's happy about it. So thanks a lot for your time and appreciate the support and look forward to seeing you on the road or at the next earnings call, as the case may be. Thank you.
spk11: This concludes today's conference call. You may now disconnect.
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