PTC Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to PTC's 2025 fourth 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.

Good afternoon. Thank you, Operator, and welcome to PTC's fourth quarter and fiscal year 2025 conference call. On the call today are Neil Barua, Chief Executive Officer, Christian Talbatia, Chief Financial Officer, and Robert Dada, Chief Revenue Officer. Today's conference call is being broadcast live through an audio webcast, and the 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 10Q, 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, November 5th, 2025, 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 PPC's Chief Executive Officer, Neil Barua.

Thank you, Matt, and good afternoon, everyone. I'll begin by addressing the press release we issued earlier today regarding the definitive agreement we've reached for TPG to acquire our Kepware and ThingWorx businesses. This is exciting news for us. For our Kepware and ThingWorx customers, this move is designed to enhance the value these products deliver. By partnering with TPG, Kepware and ThingWorx gain additional investment, expertise, and operational focus. all for the businesses to continue growing and delivering more for customers. For PTC, this move increases our focus on the areas central to our intelligent product lifecycle vision, CAD, PLM, ALM, and SLM, and the growing emphasis on SAS and AI. With our resources and investment concentrated in these areas, we will continue helping our customers address some of their most pressing challenges by enabling them to fully leverage the value of their product data and to transform each stage of the lifecycle. When the transaction closes, we will maintain a close relationship with the Kepware and ThingWorx businesses to ensure a smooth transition. Christian will walk you through more of the transaction details in a few minutes. Turning to fiscal 25, Q4 was another quarter of solid execution. we delivered 8.5% constant currency ARR growth and 16% free cash flow growth year over year. Throughout the quarter, we were encouraged to see some of the early benefits of our go-to-market transformation show up operationally. Our execution on large strategic agreements improved through better coordination between our sales, technical, and customer success teams. We said on our Q3 call that we had a robust pipeline of large Q4 deals, and I'm proud to say we closed most of them. The dynamics of these deals are encouraging in the context of our intelligent product lifecycle vision and focus areas. We want our largest CodeBeamer deal ever as a customer in the automotive vertical decides to move off legacy processes and invest in its next-gen product data foundation. A large windshield competitive displacement win in the MedTech vertical was alongside a ServiceMax expansion, reinforcing this customer's commitment to building a product data foundation and extending that data to other parts of the lifecycle. We also won the largest Onshape deal ever. This was a competitive displacement with the customer embracing the workflow and collaboration benefits of a cloud-native SaaS offering. You could read more about our customer wins across verticals in our appendix slides. ARR came in at the middle of our Q4 guidance range, which reflects the variability of the large deal structures we discussed in our Q3 call. Importantly, we ended the year with record deferred ARR under contract, providing strong visibility into fiscal 26 and beyond. While not all of that converts immediately, it gives us confidence in our growth trajectory as these multi-year ramps activate. In addition, our go-to-market teams are operating with great alignment across verticals and geos. We continue to execute on commercial optimization levels, and the overall feedback from the field is very positive. Our marketing messaging, focused on our intelligent product lifecycle vision, is helping customers clearly see how our portfolio enables them to leverage their product data to transform with AI. Finally, we appointed John Stevenson, an industry veteran, as Chief Product Officer. John is establishing a clear product operating rhythm to support our go-to-market motion and tightening product and R&D linkage to increase the pace and predictability of roadmap execution. Overall, Q4 capped off a year of steady, disciplined execution during a volatile market environment. The go-to-market momentum we described last quarter didn't fade. It accelerated. our teams leaned into the transformation and strengthened customer relationships at the executive level, and we saw clear evidence of multi-product adoption across verticals. When we started the go-to-market transformation, we said it would take 18 to 24 months to hit full stride. Less than a year in, the factors we control are clearly moving in the right direction, and we are focused on making them more repeatable and sustainable in fiscal 26. Regarding the outlook for Fiscal 26, for ARR growth, we are guiding to a range of 7% to 9% with Kepware and ThingWorx, and 7.5% to 9.5% without Kepware and ThingWorx. We are also well on track to deliver $1 billion of free cash on Fiscal 26, including Kepware and ThingWorx. Regarding that new ARR, Q1 will be similar to last year, and we expect momentum to build through the year. supported by the shape of our pipeline and deferred ARR. The high end of our annual ARR range accounts for continued improvements in our go-to-market progression. Minimal customer disruption from the TEPWARE and ThingWorx divestiture in a relatively steady macro environment. The low end of our annual ARR range accounts for some worsening in the macro environment and unexpected disruption from the divestiture. Variability in deal structures can also move us higher or lower in the range. Our confidence in fiscal 26 is underpinned by our focus on our intelligent product lifecycle vision. AI is cementing the importance of structured product data foundations, and PPC is uniquely positioned to make these possible. Customers understand that applying AI to siloed or stale data doesn't work. and are turning to PTC's portfolio to build their data foundation. This begins in engineering and extends to other departments and functions across the lifecycle. AI is then applied to this contextual data, and even more substantial transformations become possible for our customers. We're enhancing our CAD, PLM, ALM, and SLM offerings to make it even easier to build a product data foundation, and we're embedding more AI. We've recently released new AI capabilities in ServiceMax, Servagistics, Onshape, and Arena, and we have a strong Creo AI roadmap underway. We are also on track to release new versions of Windchill, Windchill Plus, and CodeBeamer in the weeks ahead. I would like to now turn to our capital allocation strategy. In fiscal 26, with our leverage below one times, we expect to return excess cash to shareholders. We expect to buy back between $150 million and $250 million worth of shares per quarter during fiscal 26, starting with $200 million in Q1. Our capital allocation strategy remains disciplined and flexible, as we will continue to make investments in R&D around our intelligent product lifecycle vision and leave the door open for token acquisitions. In summary, we feel momentum building. We're pleased to share today's news about Capware and ThingWorx, and we're happy they're set up for success with TPG. And for PTC, we move with clarity and a purposeful direction with the entire company focused on delivering our intelligent product lifecycle vision for customers. With that, I'll turn the call over to Christian.

Thanks, Neil, and hello, everyone. Starting off with slide six, I'd like to provide some more details on the KEPWARE and ThingWorx divestiture. The transaction is expected to close in the first half of calendar 2026, and our expected use of net after-tax proceeds will follow our overall capital allocation strategy of returning excess cash to shareholders while leaving room for any potential tuck-in acquisitions. We could receive up to $725 million in total cash consideration if certain thresholds are achieved. We expect either $565 or $600 million upfront, depending on performance during the period up to close. The $125 million future potential earn out is based on certain criteria related to a potential future transaction by the buyer. Assuming an April 1 close and a $565 million upfront payment, we would expect net upfront proceeds of approximately $365 million after working capital and indebtedness adjustments, divestiture-related fees, and taxes related to the transaction. Turning to slide 7, in fiscal 2025, ARR attributable to Capware and ThingWorx was approximately $160 million, and constant currency ARR growth was negative 1%. Including perpetual license and professional services revenue, the revenue contribution of Capware and ThingWorx was approximately $200 million. We estimate that approximately $70 million of free cash flows was attributable to Kepware and ThingWorx in fiscal 25. For fiscal 26, we're providing constant currency ARR guidance for PTC, including and excluding Kepware and ThingWorx. ARR growth excluding Kepware and ThingWorx is expected to be 50 basis points higher. Also, for fiscal 26, we expect the CashWare and ThingWorx transaction will impact our, as reported, free cash flow primarily due to one-time transaction-related items. To illustrate, I'll take you through a model on slide 8. Starting at the top with our $1 billion of free cash flow guidance for fiscal 20. which assumes Kepware and ThingWorx are a part of PTC for the full fiscal year. Assuming the transaction closes on April 1st, 2026, we would expect lower net cash inflows related to Kepware and ThingWorx in the second half of fiscal 26. However, we would expect this to be largely offset by a transaction services agreement which begins upon close. If the transaction closes sooner than expected, there could be a modest impact to free cash flow. Related to the transaction, we expect to incur approximately 160 million of one-time cash outflows. Approximately 35 million of this relates to one-time divestiture-related fees, and approximately 125 million relates to one-time cash taxes. We'll have more clarity on those items when the transaction closes, and we'll provide an update at that point. Remember, from an accounting perspective, the proceeds will show up in cash flow from investing, while taxes and divestiture-related costs will show up in operating cash flows. Assuming an April 1, 2026 close, This model shows that our as reported free cash flow would be approximately $840 million in fiscal 26. You will have clear visibility to the one-time cash outflows in our reporting, and we will officially update our guidance post-close. But as we think about fiscal 27, we expect to be building off the approximately $1 billion we are guiding to this year And we'll need to factor in up to $50 million of headwinds from the divestiture, which is the run rate of Kepware and ThingWorx cash flows partially offset by TSA income, which we expect to continue. Moving to slide nine and a review of the results we just reported. As you know, we believe ARR and free cash flow are the most important metrics to assess the performance of our business. To help investors understand our business performance, excluding the impact of FX volatility, we provide ARR guidance and disclose our ARR results on a constant currency basis. At the end of Q4, our constant currency ARR using our fiscal 25 plan FX rates was 2.446 billion, up 8.5% year over year. And while I know that we consistently tell investors to focus on ARR and free cash flow, rather than revenue and operating income, given some of the dynamics in the quarter, I do think that it's prudent to talk a little bit about the revenue beat versus the midpoint of our guidance range for the quarter and put this in context with our ARR results. We came in at the midpoint of our guidance range for net new ARR in Q4. And as we discussed on our last call, the biggest variable between the high and low ends of the range was going to be deal structures. It certainly played out that way. In Q4, our teams did a great job, and we contracted a record amount of customer commitments. Many of these were in the form of grant deals, many included commercial optimization levers, and several new and renewing contracts came in with longer than anticipated term lengths. In fact, our average term length in Q4 increased from approximately two years in Q4 of 24 to approximately three years in Q4 of 25. The way revenue accounting works for on-prem subscriptions under ASC 606, we record approximately 50% of the total contract value when the deal starts, and we recognize the rest radically over the term. As was evident from our revenue guidance for Q4, we were expecting a healthy uptick in revenue, reflecting the mix of large multi-year renewals and large contracts in the pipeline. But what actually happened was that we beat the midpoint of our guidance range by $140 million and the high end by $110 million. So going back to ARR. you'll recall that ARR is the best approximation of annual billings related to recurring contracts because it's aligned with the amount that we invoice the customer on an annual basis. And as far as future contractual commitments, well, in the ARR way of thinking, that is recorded as deferred ARR. In the traditional P&L way of thinking, that shows up in RPO. And when we report our RPO in our 10-K, you'll see that it's up more than $550 million, both sequentially and on a year-over-year basis. But remember, not all of that turns into ARR or revenue in fiscal 26. There's additional deferred ARR in fiscal 27 and beyond as well. This should help explain why our revenue growth in the quarter significantly outpaced our ARR growth. All in all, it was a solid quarter with a lot of long-term positive impact that you don't see in our current ARR results or near-term outlook. The significant revenue beat is also what drove the significant EPS beat. On the cash flow side of things, we generated $100 million of free cash flow in Q4. For the full fiscal year, our free cash flow was $857 million, up 16%. Note that the free cash flow we generated in fiscal 25 absorbed approximately $20 million of outflows related to our go-to-market realignment. Our 16% free cash flow growth in fiscal 25 illustrates the operating leverage we benefit from as our ARR grows. Another way to illustrate our operating leverage is through our operating efficiency percentage, which expanded by 310 basis points to 45% in fiscal 25 compared to 42% in fiscal 24. You can see this in our illustrative cash flow model on slide 23. Next, turning to slide 10, before I take you through our guidance, let me walk you through how we guide and report ARR. For fiscal 25, we provided constant currency ARR guidance and reported constant currency ARR results for all periods using our fiscal 25 plan FX rates, which were as of September 30th, 2024. And for comparative purposes, at the same time last year, we also recast historical constant currency ARR amounts at our fiscal 25 plan FX rates. For fiscal 26, we're taking the exact same approach with historical results recast using our fiscal 26 plan FX rates, which are as of September 30, 2025. For new investors who may not be familiar with our approach, please reach out to me or Matt, and we'd be happy to do a deep dive. With that, I'll take you through our guidance on slide 11. Because we don't know exactly when the Kepware and ThingWorx transaction will close, our guidance for fiscal 26 and Q1 26 includes Kepware and ThingWorx for the full year. The exception is ARR, where we are additionally providing guidance that excludes Kepware and ThingWorx. All the ARR amounts on this slide are based on our fiscal 26 plan FX rates. For constant currency ARR, excluding Kepware and ThingWorx, we expect growth of approximately 7.5% to approximately 9.5% in fiscal 26. For constant currency ARR, including Kepware and ThingWorx, we expect growth of approximately 7% to 9%. Our ARR guidance is mindful of the efforts required to separate HEPWARE and ThingWorx as we push toward a closing expected in the first half of calendar 2026. From a linearity perspective, we're expecting similar quarterly seasonality as in fiscal 25 for net new ARR. This primarily has to do with the shape of the pipeline, linearity of churn, and the linearity of deferred ARR, which is heavily skewed to Q4 in fiscal 26. Note that our cash flow guidance is not on a constant currency basis, and to be clear, our business as currently constituted is on track to deliver approximately $1 billion free cash flow in fiscal 26. We have a high degree of confidence in our guidance for free cash flow due to the predictability of our cash collections and the disciplined budgeting structure we have in place. Importantly, we maintain consistent billing practices over time. We bill primarily upfront annually, one year at a time, regardless of contract term lengths, so our free cash flow results over time are comparable. In fiscal 26, we expect similar invoicing seasonality compared to the previous five years. Based on this and our expected cash outflows, we expect approximately 55% to 60% of our free cash flow to be generated in the first half of the year, and for fiscal Q4 to be our lowest cash flow generation quarter. Some of you may have noticed that our guidance assumption for CapEx is stepping up by approximately $20 million in fiscal 26, which is also absorbed in our guidance for free cash flow. We view this as one time in nature because it's related to moving a major R&D center to a new office. Although our focus is on ARR and free cash flow, we're providing revenue and EPS guidance to help you with your models. It's worth noting that our revenue guidance for fiscal 26 looks different from fiscal 25. We expect revenue to be up north of 10% in the first half, up in the mid-single digits in Q3, and to decline in Q4. This obviously reflects the dynamics I discussed earlier with Q4 being down given the significant overperformance in Q4 of 25. Moving on to slide 12, here's an illustrative constant currency ARR model for fiscal 26. Focusing on PTC, including Capware and ThingWorx, The column on the right illustrates the midpoint of net new ARR growth that corresponds to our fiscal 26 constant currency ARR guidance range of 7% to 9%. Consistent with my reminder from last quarter, we expect churn to remain low in fiscal 26 because our customers need to maintain subscriptions to our software to continue designing, producing, and servicing the product. Turning to slide 13, here's a similar illustrative model for Q1 of 26. Focusing on PTC, including Capware and ThingWorx, the column on the right illustrates the dollar range of Q1 26 sequential net new ARR growth that corresponds to our Q1 26 constant currency ARR guidance range of 8% to 8.5%. As a reminder, Q1 is typically our lightest net new ARR quarter given normal renewal seasonality and the timing of larger enterprise transactions. As I mentioned earlier, we expect similar linearity for net new ARR in fiscal 26 compared to fiscal 25. What's important, however, is what Neil mentioned earlier, that our demand capture remains healthy in a challenging macro environment. And we're entering the year with a stronger pipeline than when we started fiscal 25 and a solid deferred ARR balance, which is heavily skewed to Q4. As you know, our net new ARR can be somewhat volatile in any given quarter, given dynamics such as new or renewal booking seasonality, timing of deferred ARR starting, how much of our new bookings in any given quarter starts in the quarter, how much churn we expect in any quarter, et cetera. All of that said, we feel good about the state of the business, the focus on the intelligent product lifecycle and its relevance to our customers as evidenced by our pipelines. We have many initiatives underway to capture the opportunity to drive net new ARR growth in the future. With that, I'd like to turn the call back over to the operator for the Q&A session.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. We ask that you please limit yourselves to one question only. If you have additional questions, please return to the queue. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Ken Wong with Oppenheimer and Company.

Fantastic. Neil, congratulations on the divestiture of the IoT business. Perhaps you can give us some context behind the decision to move on from ThingWorx and Capware. And then what should we as investors deem to still be strategic in the portfolio? Are there any other products or components of the IoT business that still needs to be shut off?

Good to hear from you, Ken. So first off, on the decision process, as I've been saying for a couple of years now, we've been really focusing on putting the wood behind the arrows around the things that create the greatest customer opportunity and for PTC, where we have the highest right to win. And we talked through all the core priorities, which has now formulated itself into this vision around the intelligent product lifecycle. And because of that and because of the needs and the requirements for our customers around executing across that vision, you know, we decided to make sure that every single person in the company, all our resources or attention are dedicated to executing across achieving that vision of the intelligent product lifecycle. And so that's the way we went towards the strategic decision to say, look, at the end of the day, kept where the thing works, good businesses, great products, but quite frankly, TPG has a thesis of getting deep runs of the factory floor and operations, and those products will do very well under that framework, leaving PTC the ability to really continue to deliver what hopefully you saw in Q4, Ken, around executing around our core priorities and just ramping up that focus and attention on it. In terms of your second question around the strategic component of what we have left, I feel good as we sit here around the portfolio and how it relates to the intelligent product lifecycle. how it relates to building a product data foundation for our customers, how it relates to our ability to apply generative and agentic AI to that product data foundation, and how to send that product data to other constituents of our customers, like in the service department, So, collectively, I feel good now that, you know, with the transaction closing, we have an ability now to fully focus all our portfolio energy across the intelligent product lifecycle vision that we laid out.

Fantastic. Thank you, Neil.

Your next question comes from Jason Salino with KeyBank Capital Markets.

Hey, great. Thanks for taking my question. I know a lot of moving parts and it's somewhat, you know, a muted point because of the cash tax implications. But Christian, the $1 billion free cash flow guidance, is there any way to know how much of a whole BBA benefit you're expected to see, you know, next fiscal year? Thank you.

So, there is some tailwind from the new Section 174 decision that was in OBDA that is included in that number. To be honest, We don't actually have to make the final decision on which of the three main doors, i.e., the all one-year, two-year, or just let the amortization run out doors, we go through until later this fiscal year. Remember, though, that that's also offset, also included in that, you know, kind of billion-dollar number is the incremental capex. that we're seeing related to the transition of one of our largest R&D facility into a new office. So there's a bunch of puts and takes that go into that number, but certainly the tailwind from Section 174 is included in that number.

Okay, great to see nonetheless. Thank you.

Your next question comes from Clark Jeffries with Piper Sandler.

Hello. Thank you for taking the question. I wanted to ask how you would characterize the push versus the pull with the deal structures this quarter. Did you feel like some of these customers were wanting to push out certainty and maybe they wanted to make the commitment, but they didn't know what the next 12 months might hold for them, so they wanted to commit to a ramping deal or a longer duration agreement, any comment there would be helpful.

Thank you.

Sure, Clark.

Continue for me, too. So let me be clear. In Q4, as we mentioned on our Q3 call, we had a number of large transactions in the pipeline. As I mentioned up front, we closed the majority of those. An excellent execution by the team. We also mentioned that the variance in the A or R for Q4 would happen based on the variance of how the deals would get structured. In the larger deals, in some transactions, as we've noted, there was ramped deals.

Our growth of 194 last year, and you're saying midpoint 195 this year. How are you feeling about the overall environment that you're going to book at the same kind of level?

Just kind of how do you sort of come to that, come to the level for 26?

Hey, Blair, I raised my hand, so let me take the front end of this and then Christian can add to it. The way we're looking at it is this approach of our guidance for 26 characterizes a disciplined approach to making sure you understand the dynamics of how we're thinking about this year. First off, we're benefited by a very strong, committed, deferred ARR entering this year versus what we had last year. So that is a strong set of balance that we've got within a committed set of ARR coming into the business, predominantly in the second half of the year and predominantly in Q4, as we mentioned. We also have been undertaking, as we mentioned, a go-to-market transformation that is about nine to 10 months in the making. And we feel very strongly that we've moved the ball forward, but still the work needs to now become a repetition and durable. And when we think about that in light of the divestiture and call it the six-month time period from today's announcement to close, for nine months in calendar year. But in that framework, we model a lot of April 1st. When we take the context of all the work needed now, then there's a possibility of the low end being something that we all should consider. But if we're looking at the way the business is going right now and we think about the deferred ARR, the momentum that Rob and team have been building on the go-to-market, and think about the customer pull that we're getting, the midpoint is actually, with the macro not getting worse or better, is a good way to look at it. Now, the reason why we're disciplined, we actually have line of sight to get to the high end of the guidance in terms of, Go-to-market progression continues to repeat the greatness that we saw in Q4, builds on that, and continues that process. The macro doesn't get weaker. And Kemp where the thing works actually doesn't become a distraction. We've got that range from a discipline manner. The good news is we're looking at it. We're being disciplined around our approach. We've got a lot of hard work going to make sure this go-to-market transformation continues on the path it is. And we're working hard to make sure that the results speak for themselves as we get into the course of this year.

Okay, great. Thanks very much for the call, Arneal.

Your next question comes from Matt Hedberg with RBC Capital Markets.

Great. Thanks for taking my question. Neil, you know, it's been about a year since you put in the verticalized sales. Are there any other significant go-to-market changes that you're planning for this Q1? And how might that sort of vertical focus pay additional dividends, you know, as you get another year under your belt?

Yeah, so I'll start, and Rob's sitting right here next to me, ready to get hauled into this match here because he's excited to share with you what happened a couple weeks ago. And you can feel the energy and excitement around. Now let's execute across the Q4 momentum. Let's repeat it. Let's make sure it's consistent. Let's get the messaging consistent. Let's get the C-level messaging and acknowledgement consistent. And I see Rob and the GoToMarket team as let's keep repeating and scaling and making this durable. But I'll let Rob... Talk about exactly what he's thinking about as he enters this year.

Yeah, so thanks for the question. As you know, we did do that alignment by vertical in industry, which was a really important move to set us up for growth. And that alone, you know, just coming through that as the team did and being able to deliver, you know, in the three quarters that it happened was an incredible accomplishment and so on. As Neil just mentioned, we had our first global kickoff. At which, by the way, we had our partners in the room for the first time, so side by side, getting the message unfiltered directly at the same time, which was a stated goal of ours to bring the party community closer and to expand our reach through our SI. So, you know, that was a great start to the year. And what we have this year that we didn't have last year was that all of that potential disruption was is out of the way. So this year we can make all of our efforts fixed on elevating the message, which we talked about. We have a way to get now to the C level that we didn't before to tell a story there that I think will definitely resonate and has already tested that in Q4. We're starting to diffuse that through our customers and also through our go-to-market organizations. We're reaching out to our SIs in ways we hadn't before, and not only through, of course, inviting them to our kickoff, but doing it in a more methodical way where there's a great opportunity for them, for our mutual customers, and for us to benefit.

And now, you know, we're going to start to think about... Your next question comes from Jay Bleashour with Griffin Securities.

Thank you. Good evening. Neil, you used two of my favorite words, roadmap execution. And it's interesting that you said that because for the last number of years, PTC has, I think, done well in that regard, particularly with regard to Creo and Winchell, hence the share gain for each. So what is it from here that you mean precisely with regard to additional improvements in that execution, and how does it tie into the multi-solution, three-letter acronym type sales that you're trying to do? And a quick one for Christian, since you noted the record increase in RPO, could you comment as well on current RPO, how that looks sequentially or year-over-year?

Let me take the front end. So, Jay, thanks for the question. I would say that, yes, the execution for 40 years of this company around building great products has gotten us this far. And what I think John Stevenson, who you'll soon meet, is aligned towards doing in collaboration with his colleagues across the other functions, is amazing. As an example, with Windchill, and you'll see this, Jay, the execution around a new UI UX that actually end users will adopt more and be able to think about how to use product data more available across the enterprise is something that we're executing towards. And John's putting this one to make sure it happens on time. It happens before customers and our sales team even ask for it in urgency. right? Because we know that that is a need. So just the rigor around making sure roadmap items result in customer value and Rob's team, they could get from a sales team perspective, that is actually an element of what we've done in alignment that is newer to the company than the last 10 years, I would say. And it's got really good value already. That's point number one. Number two is On the AI end, you're going to see this continuous flow of execution of roadmap that is aligned to how this AI, with this incredible contextual data that we've got in our core systems, give benefit and outcomes to our customers. that no one else can provide to that customer other than VTC. And that's the area where John's, like, pushing on very aggressively. He was in Israel last week. And really, to summarize this, Jay, making sure that the teams are aligned to execute across that AI roadmap in conjunction with the intelligent product lifecycle for our core products that give real value to our end customers across the core capabilities we've got. Christian?

Yeah, hey, thanks. In terms of the current portion of the RPO, I think you'll see in the K when it comes out that approximately 55% of the total RPO we'd expect to recognize over the next 12 months.

Very good. Thank you both.

Again, if you would like to ask a question, press star, then the number one on your telephone keypad. As a reminder, please limit yourself to one question only. Your next question comes from Tyler Radke with Citi.

Yeah, thank you for taking the question, and congrats on all the announcements here. Neil, maybe a bigger picture for you. I mean, clearly the divestiture of the IoT business, the buyback, in terms of allocating a lot of capital back towards PTC, really down on the core CAD and PLM aspects of the business. How do you think about where the growth of this business could go over time? What are sort of the key levers you need to see for this business to get back into the double digits? Thank you.

Yeah, so look, the good news here, Tyler, is that the process and the foundation laying was centering the student body and now the customer messaging around this disciplined and innovative intelligent product lifecycle vision. And that's resonating with customers. It resonated in Q4. And as you heard Rob say, he's going to make it resonate even more over the course of this year. So setting the strategy and vision was critical. Setting the student body directing towards that has been critical. Setting the foundation of all the practices and businesses has been critical. And now the cleaning up of all the focus of the business being put right into this vision that we've got versus the IoT businesses is setting us up for building on our ready momentum that we saw last year. But in this course this year, Tyler, to make sure we execute across all those things that we are super jazzed about executing tomorrow. And so what I think the good news here is that the ingredients of being able to answer a question and the process and progress that we're making on those ingredients have moved materially forward from 12 months last year, right? This year is important to repeat that and make it durable. And at that point, we'll be able to come back and say, look, here's the durable growth rate for the business, but we're focused on making sure the underpinnings are taken care of, and then we know that the results will speak for themselves over time.

Thank you very much.

There are no further questions at this time. I'll now turn the call back over to Neil for any closing remarks.

Thank you all for joining. We appreciate it. A number of us will be on the road hitting investor conferences, and we look forward to seeing some of you that support and participate in today's call. Thank you.

This concludes today's