Q3 2023 PTC Inc Earnings Call

July 26, 2023

[music].

During todays presentation, all parties will be in a listen only mode.

Following the presentation the conference will be opened for questions.

I would now like to turn the call over to Matt Schmal Ptc's head of Investor Relations. Please go ahead.

Okay.

Good afternoon, Thank you, Josh and welcome to Ptc's 2023 third quarter Conference call.

The call today are Jim <unk>, Chief Executive Officer, Kristian, Talvitie, Chief Financial Officer, and Neil Barbara.

Oh.

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 Dot PTC Dot 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.

A 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 call the turn the call over to <unk>, Chief Executive Officer, Jim couple them.

Thanks, Matt 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 our recent live works event and I hope that will 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 a R. R and free cash flow are the best metrics to assess the performance of our business in.

In Q3, we exceeded our guidance on both metrics and today, we are again, raising our full year air our 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 metrics they are on slide four.

In Q3, and we came in at 186 8 billion, which was above the high end of our guidance range and up 25% year over year.

Organic growth accelerated slightly to 14%.

Servicemaster 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 cold Beamer. So we're now counting code beamer in our organic are our results.

Though the manufacturing PMI continued to indicate a sluggish environment globally. Our topline <unk> continues to show good resilience in Q3, we saw broad based are our strength across all product groups and geographies and our churn results remained good.

Given strong year to date results together with a solid pipeline and outlook for Q4, we're raising our full year <unk> guidance midpoint as I mentioned Christian will provide the details later.

Moving to slide five and switching to our Bottomline deal.

We delivered $164 million of free cash flow in Q3 ahead of our guidance and up 46% year over year.

Remember that a R. R is the primary driver of cash flow. So this result was driven by a combination of strong AUR growth and higher operating efficiency.

We raised our key our free cash flow guidance for the year Christian will elaborate on that as well.

Turning to slide six.

Let's look at our growth by geography.

Our growth in the Americas was 29% in Europe are our growth was 24% and in APAC here our growth was 16%.

On a global basis FX was neutral to a 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 service mix.

Speaking of service Max we saw our first cross sell activity happened 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 performance of our product groups on slide seven.

In CAD, which is those products that enable authoring of product data. We delivered 11% are our growth in Q3 in a market that's been drawing an estimated 7%.

Within these results the growth was primarily driven by Korea, but supplemented by strong percentage growth in non chip.

PTC is clearly taking share in different parts of the CAD market with both products.

In P. L M, which includes those products has enabled data and process management or a or our growth rate in Q3 was 36% or 16% organic with the incremental inorganic growth coming from servicemaster in.

In <unk>, we continued to significantly outperform the market, which has been growing an estimated 8% in core P. L. L.

Our our growth for <unk> in Q3 was primarily driven by windchill.

Supplemented by strong organic percentage growth in ALM and SLM.

Clearly, we're taking significant share in the <unk> market as well.

Turning to slide eight I wanted to double click on our a R. R 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 are consistently layered new growth strategies on top of existing growth strategies to create additional tailwind to fuel faster growth.

Let me explain.

Our growth strategy starts at the bottom of the chart, where we participate in CAD and <unk> markets that are growing in the upper single digit range, so that as 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 ear are 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 a 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 their 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.

Why companies like PTC cross the value of that to get there.

You can refer to our FY 'twenty, one 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-19 and inflationary periods.

Collectively these improvements have created incremental tailwind as the company growth rates, and we think theres more to be done here going forward.

We could've been satisfied stop there, but we didn't we saw the CAD and <unk> markets beginning to pivot towards SaaS, which led us to acquire the peer SaaS Unshapen arena businesses.

These businesses continue to be growth tailwind as the growth is accretive to <unk> overall growth rate.

Then in fiscal 'twenty, two we decided to bring the SaaS phenomenon that was driving strong unshapen arena growth to our core CAD and <unk> business, which we did using the Atlas platform that leveraged unshaped technology.

This strategy allows us to land larger our run rates.

We are selling both the software and the service to deliver it.

And of course now we can expand the existing on premise customer base are our 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 SaaS driver you should consider that SaaS 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 'twenty, two and 'twenty three we made smart acquisitions.

Like code Beamer for the a L M part of our <unk> strategy and service Max for the SLM part of our Pls strategy.

On a standalone basis. These businesses are growing faster than P. D C and of course these growth tailwind will increase as we further develop the cross sell synergies we are pursuing.

Cross sell is already becoming meaningful for cone beam or now and looks very promising for service Max where we're still quite early in the process.

So when an investor asks what is driving the 14% organic growth. The PTC is reporting this quarter. The answer really is all of it except of course service Max which is not yet factored into the organic calculation, but we'll be in a few quarters.

For those who question whether this level of AOR growth is sustainable.

First like to point out that fiscal 'twenty, three will be the seventh consecutive year of double digit <unk> growth across good macro setups in bad and indeed are our 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 'twenty, three 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 are our growth at or near the top of our peer group.

Most importantly, please keep in mind that is a or are 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 ITC I in.

In the form of DXP services.

In turn the large system integrator partner ecosystem, we built has become a critical part of our growth strategy as Si's help create software demand in order to drive demand for their own services.

We've been back filling the low margin services mix with high margin software all along.

And by the time, we get to our 5% services mixed 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 should dramatically increase the productivity of our sales force over the years.

In particular, our development of a strong cross sell muscle has been very helpful. The sales productivity and naturally we leverage this key strategy whenever we bring acquired products into the mix like code Beamer and service Max.

The third big driver in this group as 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 are consistently proliferated the strategy across our portfolio and in the 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 30 year 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.

Reserving sufficient dry powder to invest more aggressively to develop new high growth businesses like on shape.

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 air or requires relatively little growth in terms of variable costs. We've been doing a good job. Following a rule of thumb that on average our costs will rise at half the rate of air our 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 discounted price levels. The.

The incremental growth we get here it comes at nearly 100% margin.

Finally, the changes we made in fiscal 'twenty, one to align our field organization to SaaS organizational principles.

Together with the operational rebalancing, we did in fiscal 'twenty two to better align.

Spending with our growth outlook in Iot and they are 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 to what I said about are our growth the significant margin expansion were delivering here in fiscal 'twenty three 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 'twenty five and.

And expect we can get to mid Forty's longer term. So we continue to have a lot of runway here.

Moving on to slide 10, I'd like to discuss our plans for CEO succession.

I feel the company is in great shape in terms of topline 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 a growth powers on while PMI trends in the wrong direction.

So for me with more than 25 years under my belt now with 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 loved 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 CEO succession practice to determine what characteristics are most important in our next CEO .

Our internal candidates into consider external candidates.

That careful process led us to an ideal successor in Neil Barilla, the former CEO of Servicemaster.

Neil is smart and articulate and he knows our industry. He has been a CEO twice already yet still has a lot of career runway.

He is a finance background, but really leans in with customers and product strategies.

He has developed great followership within PTC already and by the time Neil become 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 and the companys 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 experienced 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 Chris.

Kristian Talvitie will continue to hit 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.

Thanks, Jim Hello to everyone listening, it's great to be on the call today.

D. C 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.

Learned a lot about PTC since the service Max acquisition seven months ago.

Excited to continue learning from Jim My Christian and the rest of the leadership team during the transition period I.

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 service Max for about four years before the acquisition by P. T C.

Part of that I was CEO of IPC systems for four years prior to IPC I worked in the technology space as an operating executive at both Silver Lake and Francisco partners.

PTC is in a terrific position in my top priority is continued execution over these last six months I've seen firsthand how excited our customers are about our motto base closed loop digital thread strategy and how critical our software is for their digital transformation journeys.

Also observe that in.

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'll be meeting and spending more time with our customers employees partners and investors I'll be joining many upcoming investor and analysts meetings with Jim and Christian and I look forward to meeting you Jim. Thanks, again to you and the board over to you Kristian.

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, our references will be in both constant currency and as reported.

In Q3, 'twenty three our constant currency <unk> 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 <unk> was $1 7 billion up 14% year over year.

In Q3, our as reported <unk> was $61 million higher than our constant currency <unk>.

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 PMI is 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 'twenty, one and has been under 50 for almost a year now the eurozone PMI has been particularly weak.

In contrast to those trends our topline, including in Europe has continued to grow.

Our subscription business model and low churn rates make our IRR resilient and demand for digital transformation continues across our customer base.

In Q3, our <unk> benefited from some timing, which we factored into our guidance for Q4 naturally. We also took the outlook for bookings churn start dates deferred air are.

Into account when we raised the midpoint of our fiscal 'twenty, three or our 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 a 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 IRR 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.

5 billion with an aggregate interest rate of five 6%.

Partially offset by a $3 million decline in professional services revenue the.

During Q3, we paid down $180 million of debt and at the end of Q3, we had $1 billion in high yield notes of $500 million term loan and approximately $245 million drawn on our revolver.

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.

We have a second payment for the service Max transaction due in October 23 of $650 million of.

As we've discussed previously revenue was impacted by ASC 606. So we do not believe that revenue is the best indicator of our underlying business performance, but we'd rather guide you to <unk> as the best metric to understand our topline performance and cash generation potential.

Of which $620 million.

As already reflected as debt on our balance sheet and $30 million of imputed interest will be reflected in our Q1 'twenty for cash flow.

We intend to fund this payment with cash on hand, and our revolving credit facility.

Moving to slide 14, we ended the third quarter with cash and cash equivalents of $282 million.

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.

Our gross debt was 2.365 billion with an aggregate interest rate of five 6%.

We expect to be at or below three times levered.

During Q3, we paid down $180 million of debt and at the end of Q3, we had 1 billion in high yield notes of $500 million term loan and approximately $245 million drawn on our revolver.

By the end of Q4 and below three times levered throughout fiscal 'twenty four.

Given the interest rate environment, we continue to prioritize paying down our debt in fiscal 'twenty, three and fiscal 'twenty four we paused our share repurchase program and expect our diluted share count to increase by approximately 1 million shares in fiscal 'twenty three.

We have a second payment for the service Max transaction due in October 23 of $650 million.

Of which $620 million.

We expect to have substantially reduced our debt by the end of fiscal 'twenty four and we'll then revisit the prioritization of debt Paydown and share repurchases.

As already reflected as debt on our balance sheet and $30 million of imputed interest will be reflected in our Q1 'twenty four.

Cash flow.

Despite this interruption.

We intend to fund this payment with cash on hand, and our revolving credit facility.

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.

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.

Also taking into consideration the interest rate environment and strategic opportunities.

We expect to be at or below three times levered.

Next slide 15 shows are a by product group.

By the end of Q4 and below three times levered throughout fiscal 'twenty four.

In the constant currency section on the top half of the slide we use FX rates as of September 32022 to calculate.

<unk> for all periods.

You can see on this slide how FX dynamics have resulted in differences between our constant currency and as reported over the past seven quarters.

We expect to have substantially reduced our debt by the end of fiscal 'twenty four and we'll then revisit the prioritization of debt Paydown and share repurchases.

Based on exchange rates at the end of Q3, 'twenty three our as reported <unk> at.

At the end of fiscal 2003 would be higher by approximately $64 million compared to the midpoint of our constant currency guidance.

Despite this interruption.

Our long term goal, assuming a debt to EBITDA ratio is below three times remains to return approximately 50% of our free cash flow to shareholders via share repurchases.

We report.

Both actual and constant currency results and FX fluctuations can have a material impact on actuals, but remember that we provide our guidance on a constant currency basis, if exchange rates fluctuate significantly.

Also taking into consideration the interest rate environment and strategic opportunities.

Next slide 15 shows are a by product group.

In the constant currency section on the top half of the slide we use FX rates as of September 32022 to calculate <unk> for all periods.

Between the end of Q3 and Q4 the impact to our as reported.

I 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.

You can see on the slide how FX dynamics have resulted in differences between our constant currency and as reported over the past seven quarters.

Based on exchange rates at the end of Q3 'twenty three our as reported <unk> at the end of fiscal 'twenty, three would be higher by approximately $64 million compared to the midpoint of our constant currency guidance.

With that I'll take you through our guidance on slide 16.

For all our guidance amounts we are using our constant currency FX rates, which again are as of September 32022.

We report both actual and constant currency results and FX fluctuations can have a material impact on actuals, but remember that we provide our guidance on a constant currency basis.

For fiscal 'twenty, three we expect constant currency <unk> of 1.935 to $1 95 billion, which corresponds to constant currency growth of 23% to 24%.

We raised the low end of our guidance by $10 million. So the midpoint of our IRR guidance is up $5 million.

If exchange rates fluctuate significantly.

The end of Q3 and Q4, the impact to our as reported <unk>.

On cash flows we are again, raising our fiscal 'twenty three cash flow guidance, we're now targeting cash from operations of approximately $605 million and free cash flow of approximately $585 million.

Would also change.

We believe constant currency is the best way to evaluate the top line performance of our business.

Does it removes FX fluctuations from the analysis positive.

Or negatives.

As I pointed out last quarter I think it's worth highlighting that we're raising our cash flow guidance for the year well. We have also been increasing investments in select growth opportunities for our business in the back half.

With that I'll take you through our guidance on slide 16.

For all our our guidance amounts we are using our constant currency FX rates, which again are as of September 30, 2022.

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.

For fiscal 'twenty, three we expect constant currency <unk> of 1.935 to $1 95 billion, which corresponds to constant currency growth of 23% to 24%.

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 raised the low end of our guidance by $10 million. So the midpoint of our guidance is up $5 million.

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 a similar quarterly linearity and fill.

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 guidance is approximately $44 million.

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.

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.

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.

And we plan $11 million of payments in Q4, which we've also factored into our free cash flow guidance.

We maintain consistent billings practices, and we've optimized our processes around billings and payments.

Going forward.

We also plan to provide full year and quarterly guidance for both revenue and EPS.

Payments over the past two to three years.

Does have 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 'twenty three as well.

We continue to believe that revenue and EPS are not good measures of our business performance and internally, we look at <unk> as our primary top line metric and free cash flow is our primary bottom line metric.

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 guidance is approximately $44 million.

That said the public scorecard is still often revenue and EPS and while we have consistently met or beat on <unk> and free cash flow over the past few years, we sometimes score a miss on revenue or EPS.

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.

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.

And we plan $11 million of payments in Q4, which we've also factored into our free cash flow guidance.

The EPS ranges.

We're providing are aligned with our revenue guidance ranges.

Going forward.

We also plan to provide full year and quarterly guidance for both revenue and EPS.

Which appropriately allow for a broad range of outcomes, given ASC 606 related dynamics for.

We continue to believe that revenue and EPS are not good measures of our business performance and internally, we look at <unk> as our primary top line metric and free cash flow was our primary bottom line metric.

For fiscal 'twenty, three we've narrowed our revenue guidance range and primarily due to FX fluctuations, we lowered our revenue guidance midpoint by $5 million.

Our fiscal 'twenty three revenue guidance range is 2.09 to $2, one 2 billion and for Q4, we're guiding to $540 million to $570 million.

As a reminder, ASC 606 makes revenue fairly difficult to predict in the short term for on premise subscription company more importantly revenue does not influence our or cash generation as we typically bill customers annually upfront regardless of contract term lengths.

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.

Yeah.

Moving on to EPS for fiscal 'twenty, three we expect GAAP EPS of $2 14 to $2 45.

Which appropriately allow for a broad range of outcomes, given ASC 606 related dynamics for.

And non-GAAP EPS of $4 seven.

For fiscal 'twenty, three we've narrowed our revenue guidance range and primarily due to FX fluctuations, we lowered our revenue guidance midpoint by $5 million.

$4 38.

For Q4, our guidance range is 47 to 77.

Our fiscal 'twenty three revenue guidance range is 2.09 to $2, one 2 billion and for Q4, we're guiding to $540 million to $570 million.

For GAAP and <unk> 95 to $1 25 for non-GAAP .

Since revenue is impacted by ASC 606, it's important to remember that earnings per share is also impact.

As a reminder, ASC 606 makes revenue fairly difficult to predict in the short term for on premise subscription company more importantly revenue does not influence a R R or cash generation as we typically bill customers annually upfront regardless of contract term lengths.

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 <unk> as you'll recall when we began fiscal 'twenty three.

We had a constant currency <unk> growth range of 10% to 14% given the uncertain macro environment.

Yeah.

Moving onto EPS for fiscal 'twenty, three we expect GAAP EPS of $2 14 to $2 45.

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 'twenty three our guidance midpoint.

And non-GAAP EPS of $4 seven.

$4.38.

For Q4, our guidance range is 47 to 77.

Is 413% constant currency.

For GAAP and <unk> 95 to $1 25 for non-GAAP .

Organic constant currency growth.

As we begin to think about next year, well, we're not guiding fiscal 'twenty four 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.

Since revenue was impacted by ASC 606, it's important to remember that earnings per share is also impact.

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 <unk> as you'll recall when we began fiscal 'twenty three.

Assuming the current macro environment continues I would not be surprised to see an IRR guidance setup.

We had a constant currency <unk> growth range of 10% to 14% given the uncertain macro environment.

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 'twenty range, regardless of the outcome for the year.

Environment will be more judicious with our spending and in a more favorable top line environment, we are likely to invest more in the business.

Is 413% constant currency.

Organic constant currency growth.

Because of the stability of the business model, we have a lot of room to match run rate topline inflows, our cash generation with run rate expense investments, which are primarily head count.

And Cogs expenses related to SaaS delivery.

I think we have proven that we will actively manage our investments in line with the macro and momentum business momentum we're seeing.

Assuming the current macro environment continues I would not be surprised to see an IRR guidance setup.

<unk>.

Looking at our free cash flow Guy.

Similar to this year going into next year.

<unk> progression, we've been able to raise.

And much like this year.

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.

I would think that we would expect to deliver a free cash flow result, within our previously guided fiscal 'twenty range, regardless of the outcome for the year.

Turning to slide 18 here is an illustrative constant currency <unk> 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 guidance for Q4 of fiscal 'twenty three.

Environment will 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 topline inflows, our cash generation with run rate expense investments, which are primarily head count.

Because our IRR tends to see some seasonality the most relevant comparison is the sequential growth in Q4 of 'twenty two.

And Cogs expenses related to SaaS delivery.

The illustrative model indicates that to hit the midpoint of our Q4 'twenty three guidance range of 1.9 $43 billion, we need to add $75 million of <unk> on a sequential basis. This is a $1 million less than the $76 million we added in Q4.

I think we have proven that we will actively manage our investments in line with the macro and momentum business momentum we're seeing.

<unk>.

Looking at our free cash flow Guy.

<unk> 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.

Fiscal 'twenty two.

All things considered considered we believe we've set our constant currency.

Guidance range prudently.

Summarizing on slide 19, first we have a strong portfolio and strategy.

This year, we've expanded our clear category leadership role in <unk>, which has become a technology backbone for digital transformation at industrial company.

Because our IRR tends to see some seasonality the most relevant comparison is the sequential growth in Q4 of 'twenty two.

The addition of service Max 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 the major on premise to SaaS transformation that should provide a multi year growth tailwind.

Fiscal 'twenty two.

All things consider considered we believe we've set our constant currency guidance range prudently.

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.

Summarizing on slide 19.

First we have a strong portfolio and strategy.

This year, we've expanded our clear category leadership role in PLO.

Which has become a technology backbone for digital transformation at industrial company.

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.

The addition of service Max further extends what was already a unique portfolio of interconnected digital thread capabilities across the full product lifecycle.

From a cost and operational perspective.

Second.

Our strong execution.

We are lean and continuous improvement mindset is part of Ptc's culture.

With organic growth at double digit levels already.

We're in the early days, but executing well against the major on premise to SaaS transformation that should provide a multi year growth tailwind.

Fourth with the organic <unk> growth in the low teens juxtaposed against <unk> that are generally in the mid forty's.

And as Jim explained, it's a massive oversimplification to focus only on SaaS as the growth driver for PTC.

Just 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.

Continue to benefit from the cumulative layers of PTC specific growth drivers, including driving customer expansion through cross selling our unique portfolio.

And finally were 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 continue to adapt accordingly.

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 a solid <unk> growth year on year to date in fiscal 'twenty three.

From a cost and operational perspective.

We are lean and continuous improvement mindset is part of Ptc's culture.

We have confidence and continued double digit growth in our free cash flow target for.

Fourth with the organic <unk> growth in the low teens juxtaposed against <unk> that are generally in the mid Forty's I Trust you would agree that we're actively demonstrating that our business model is very resilient.

For fiscal 'twenty four despite the macro uncertainty that continues to persist.

We feel good about our mid term growth aspirations and cash flow targets as well.

Our top line growth and bottom line profitability are approaching peer leadership levels.

With so many positive trends going our way we continue to believe PTC has a tremendous opportunity to continue to drive shareholder value.

And finally were led by a team that has deep expertise and a proven ability to drive growth and margin expansion.

So with that I'll turn the call over to the operator to begin Q&A.

For sure the environment around us will continue to change and we will continue to continue to adapt accordingly.

At this time, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.

Still pushing the envelope of what we can do for our customers.

We ask that you. Please limit yourself to one question only if you have additional questions. Please return to the queue. Thank you.

We're continuing to make progress towards our midterm guidance targets in a challenging macro environment, we've been able to deliver a solid <unk> growth Europe year to date in fiscal 'twenty three.

Our first question comes from the line of Jason <unk> with Keybanc capital markets. Your line is open.

Hey, guys.

We have confidence and continued double digit growth in our free cash flow target for.

Unpack here.

And Jim It looks like we have a couple more quarters like this I guess isn't that good.

For fiscal 'twenty four despite the macro uncertainty that continues to persist.

Not yet.

And Neil looking forward to working with you as well, but I guess my question.

We feel good about our mid term growth aspirations and cash flow targets as well.

We'll go to Christian but to clarify I think you said Sim.

<unk> guidance framework for entering 2024 on how you kind of entered 2023, but maybe can you just elaborate on the global markets. I know you entered this year with 12% guidance in Oklahoma.

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.

Yes, So hey, Jason first of all.

At this time, if you would like to ask a question. Please press star followed by the number one on your telephone keypad.

And thanks for the question.

I think the point that were making without really.

We ask that you. Please limit yourself to one question only if you have additional questions. Please return to the queue. Thank you.

Guiding for fiscal 'twenty, four yet, let's let's get through 'twenty, three and actually see what the macro looks like and what the what the pipeline and everything actually continues to shape up too.

Our first question comes from the line of Jason <unk> with Keybanc capital markets. Your line is open.

The shape up to looking like but we provided a fairly wide guidance range, 10% to 14%.

Hey, guys.

Unpack here.

And Jim It looks like we have a couple more quarters like this I guess listen goodbye yet.

As we started fiscal 'twenty three.

And Neil looking forward to working with you as well, but I guess my question all.

That allowed for you know.

A considerable amount of macro uncertainty, we've certainly seen that and I think that we would we would look for.

We'll go to Christian but to clarify I think you said Sim.

<unk> guidance framework for entering 2024, and how you kind of entered 2023, but maybe can you just elaborate on this a little bit more because I know you entered this year with 12% guidance midpoint.

Wouldn't be surprised to see a similar setup.

As we start next year.

Yes, I think as we reflect on it how we guided and how the year has transpired. We're pleased with the guidance. We're pleased with how resilient. The business was we're pleased with the fact that we've been able to ratchet the guidance up it feels like that was a good approach.

Yeah, So hey, Jason first of all.

And thanks for the question.

Great.

I think the point that were making without really.

Very helpful. Thank you.

Guiding for fiscal 'twenty, four yet, let's let's get through 'twenty, three and actually see what the macro looks like and what the you know.

Your next question comes from the line of Matt Hedberg with RBC capital markets. Your line is open.

Great. Thanks for taking my questions. Congrats Jim 26 years quite a run.

What the pipeline and everything actually continues to shape up to.

Neil look forward to working with you more closely and yeah, I guess, Jim we do get you for a few more quarters. So.

The shape up to looking like but we provided a fairly wide guidance range, 10% to 14%.

That's good as well.

As we started fiscal 'twenty three.

I had a question on <unk>, obviously, it's just launched.

That allowed for.

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 will see similar.

A considerable amount of macro uncertainty, we've certainly seen that and I think that we would we would look for.

I wouldn't be surprised to see a similar setup.

Upsell to what you're seeing with <unk>, plus which I believe is somewhere in the neighborhood of two X uplift.

We start next year.

Yes, Christian why don't I take the first half of the question the customer reaction and you take the uplift.

Yes, we have I would say.

Good momentum out of the blocks I mean, you know in the first quarter introducing it in the middle of the quarter. We then expect to <unk>.

Great.

Very helpful. Thank you.

Your next question comes from the line of Matt Hedberg with RBC capital markets. Your line is open.

<unk> do a lot of business, but actually our first order came from a customer was that Lifeworks and said Wow, that's kind of what we're looking for and that is our.

Great. Thanks for taking my questions. Congrats Jim 26 years quite a run.

Customer incidentally, who was planning had multiple CAD systems right now and.

Neil look forward to working with you more closely and you know I guess, Jim we do get to for a few more quarters. So.

Was planning to standardize on one.

That's good as well.

It kind of had a preference for Creel and then came to LIBOR and said what do we really want is <unk>. So that's an example of a relatively short sales cycle.

I had a question on <unk>, obviously, it's just launched.

I'm curious on some of the initial customer feedback and really then once you start to get more data do you do you suspect that we will see similar upsell to what you're seeing with with windshield, plus which I believe is somewhere in the neighborhood of two X uplift.

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 it's always good to get out of the blocks fast and I feel like we did with Korea plus in the quarter.

Yes, Christian why don't I take the first half of the question the customer reaction and you take the uplift.

Yeah, Hey.

Hey, Matt just back to your question on the uplift we.

Yeah, we have I would say.

Good momentum out of the blocks I mean, you know in the first quarter.

We would expect.

Obviously an uplift.

For <unk> as well, although I don't think it's going to be quite the two X it'll be a little bit less than that.

Introducing it in the middle of the quarter, We then expect to.

Necessarily do a lot of business, but actually our first order came from a customer was that live works and said Wow, that's kind of what we're looking for and that's a customer incidentally, who was planning had multiple CAD systems right now and.

Out of the gates somewhere.

Probably somewhere closer to I don't know $1 seven ish, maybe 1718 somewhere in that in that ballpark.

Thanks, a lot guys congrats again.

Thank you.

Was planning to standardize on one.

Your next question comes from the line of Steve Tusa with Jpmorgan. Your line is open.

Kind of had a preference for Creel and then came to LIBOR and said what do we really want is <unk>. So that's an example of a relatively short sales cycle.

Hey, guys good evening.

Okay.

From a company, who was pretty impressed with the technology and some of the advantages it brings.

Congrats to both of you Jim and Neil.

Jim didn't work with you for very long, but quite a run for sure.

Well thank you.

Not all Christian.

[laughter].

Yeah, Hey, Matt just back to your question on the uplift.

Okay.

Christian I Didnt see any disclosure like last quarter on bookings and churn.

We would expect.

And uplift.

For trio plus as well, although I don't think it's going to be quite the two X it'll be a little bit less than that.

Can you give us a bit of an update on on those metrics to the extent you can.

Okay.

Out of the gates somewhere.

Hey, Steve.

No probably somewhere closer to I don't know $1 seven ish, maybe 1718 somewhere in that in that ballpark.

So actually.

We're trying to stay focused on.

And free cash flow and and really.

Thanks, a lot guys congrats again.

Oh.

And sequential.

Your next question comes from the line of Steve Tusa with J P. Morgan Your line is open.

And thinking about that framework.

The trick with with bookings is theres. So many different dynamics to it that you just got to keep you on back layers and layers and layers and to be honest. It. It all nets out in the IRR number and the IRR guidance anyways.

Hey, guys good evening.

Hi.

Congrats to both of you Jim and Neil.

Jim didn't work would you for very long, but quite a run for sure.

So.

I mean as we.

Well thank you.

Not all Christian.

If all of this.

[laughter].

Guidance process.

Okay.

I think you'll remember what we said last year about our last quarter about expectations, and where we think that would land us.

Christian I Didnt see any disclosure like last quarter on bookings and churn.

For the full year obviously.

Give us a bit of an update on on those metrics to the extent you can.

Now we took the low end up.

Okay.

For for for the for the full year, we mentioned some timing.

Hey, Steve.

So actually.

We're trying to stay focused on.

You, obviously saw that we beat the.

<unk>.

And free cash flow and and really.

Sequential.

Or are the IRR guidance for Q3.

<unk> and sequential.

I think all of that nets out and how we're feeling about the business in the pipeline.

And thinking about that framework.

You know the trick with with bookings is theres. So many different dynamics to it that you just got to keep you on back layers and layers and layers and to be honest. It. It it all nets out in the IRR number and the IRR guidance anyways.

From that perspective.

And I guess, the 11% to 14, you mentioned as like a good framework.

Is that is that an organic constant currency.

So you know as.

<unk> that you're talking about.

As we.

Yes, It was actually 10 to 14, and yes that would be organic constant currency.

If all of this.

Guidance process and I think you'll remember what we said last year about our last quarter about expectations, and where we think that would land us for the full year obviously.

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.

Now we took the low end up.

That was something like more of an IR kind of strategic discussion as opposed to something else.

For for our for the for the full year, we mentioned some timing.

Yeah, that's exactly right you know what I mean again.

You, obviously saw that we beat the.

Really.

Sequential.

The way that we look at the business is <unk> and free cash flow.

Or are the IRR guidance for Q3.

I think all of that nets out and how we're feeling about the business in the pipeline.

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 you know varying term lengths caused so much.

From that perspective.

And I guess, the 11% to 14, you mentioned as like a good framework.

Is that is that an organic constant currency.

<unk> that you're talking about.

So much volatility that you're actually.

Yes, It was actually 10 to 14, and yes that would be organic constant currency.

Can't really use revenue and therefore really the full P&L.

As a as a barometer of business performance.

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.

But that said we also recognize that.

The investment community.

That was something like more of an IR kind of strategic discussion as opposed to something else.

When doing comparative analysis and so on.

It does actually Dale referred of revenue and EPS and as I said.

Yeah, that's exactly right you know what I mean again.

Theres, a scorecard out there and we look at the <unk> and free cash flow scorecard and say, great. We're actually doing good we're meeting or beating expectations.

Really.

The way that we look at the business is <unk> and free cash flow.

And then on revenue and EPS, where we don't provide quarterly guidance and everybody's left up to their own devices to divine.

What that might be on a quarterly or or quarterly basis revenue and EPS.

Sometimes we sometimes we miss on the scorecard, we score a mess.

Volatility that you're actually.

And so where we're really just trying to be more proactive about that and provide some.

Can't really use revenue and therefore really the full P&L.

As a as a barometer of business performance.

To provide some of our color to.

But that said we also recognize that.

Just if I could to kind of reiterate some points.

You know the investment community.

We don't think these are meaningful metrics, we prefer not to miss them anyway.

When doing comparative analysis, and so on does actually Dale referred of revenue and EPS.

So we're gonna give you some guidance.

I'm going to give you some guidance.

Oh, great centric forget it's in the right place Jim's always make more Jonathan.

And as I said, you know, there's there's a scorecard out there and we look at the <unk> and free cash flow scorecard and say, great. We're actually doing good we're meeting or beating expectations.

It makes it maybe makes it a ton of sense Congrats to all you guys again, thanks, alright. Thank you Susan.

Your next question comes from the line of Matthew Broome with Mizuho Securities. Your line is open.

And then on revenue and EPS, where we don't provide quarterly guidance and everybody's left up to their own devices.

Thanks very much.

To define.

Congratulations to Neil on your appointment and close to Jim.

What what that might be on a quarterly or or quarterly basis revenue and EPS.

And then.

Suddenly be missed.

And in terms of the timing benefit to <unk>.

Sometimes we sometimes we miss on the scorecard, we score a mess.

Just how big was that benefit.

So where we're really just trying to be more proactive about that and provide some.

What was the reason for that.

Yeah.

To provide some of our Colorado.

Hey, Matt it's a it's Christian.

Just if I could to kind of reiterate some points.

So but.

The the timing benefit was a it was a few million dollars and it just has to do with when contracts are actually getting signed.

We don't think these are meaningful metrics, we prefer not to miss them anyway.

So we're gonna give you some guidance.

It is basically what it boils down to you know what I mean.

I'm going to give you some guidance.

The deals are being worked for in many cases many months and.

Great Central forget it's in the right place Jim's always make more Jonathan.

It makes it maybe makes it a ton of sense Congrats to all you guys again, thanks, alright. Thank you Susan.

It just has to do with has to do with that really yes. I mean, it's it's the start date phenomenon Christian I always talks about.

Your next question comes from the line of Matthew Broome with Mizuho Securities. Your line is open.

Sometimes it's pretty typical that we sign a contract in this quarter, sometimes it starts in this quarter is sometimes it starts next quarter, sometimes it then ramps or not so just what we call in quarter starts.

Thanks very much.

Congratulations to Neil on your appointment and of course the gym.

Tying them.

Suddenly be missed.

And in terms of the timing benefits.

If it if it started in Q3, rather than Q4, well handheld Q3, but then it came out of Q4. So that's really what we're talking about.

Just how big was that benefit.

What was the reason for that.

Okay.

Got it and then sorry, if I could just maybe quickly I'll just tons of.

Hey, Matt it's a it's Christian.

Constant currency organic growth guidance of 13%, how sustainable is that level of growth going forward into FY 'twenty four.

So but.

The the timing benefit was a it was a few million dollars and it just has to do with when contracts are actually getting signed.

It is basically what it boils down to you know what I mean deals are being worked for in many cases many months and.

Yeah, I mean again, we're not really in our guide.

24 at this point, but.

We have.

It just has to do with has to do with that really yes. I mean, it's it's the start date phenomenon Christian I always talks about.

You know mid teens growth.

Aspirations over the mid term.

I think that Jim did a great job kind of outlining a lot of the various growth drivers are that.

That help stack up to deliver.

Delivering on that that kind of growth then you have to overlay the macro and understand.

You know if it if it started in Q3, rather than Q4, well handheld Q3, but then it came out of Q4. So that's really what we're talking about.

How that's impacting in any given period.

But as we said.

I'd be surprised if if we had a.

I wouldn't be surprised if we had a similar.

Got it and then sorry, if I could just maybe quickly asked dozen tons of.

<unk> set up to last year.

So we think that you know.

Constant currency organic growth guidance of 13%, how sustainable is that level of growth sort of going forward into FY 'twenty four.

Whatever low to mid teens growth is.

Sustainable.

Alright, Thanks again.

Your next question comes from the line of Adam Borg with Stifel. Your line is open.

Yeah, I mean again, we're not really in our guide.

24 at this point, but.

Awesome. Thanks, so much for taking the question.

We have.

You know mid teens growth.

Maybe just on the macro again I know you didn't want to talk our Christian at one o'clock.

Aspirations over the mid term.

Explicitly around bookings trajectory in the quarter, but maybe you can talk a little bit more about the macro overall, how sales cycle change in the quarter at any changes by geography or vertical.

I think the Jim did a great job kind of outlining a lot of the various growth drivers are that.

That help stack up to deliver.

Yeah.

Delivering on that that kind of growth then you have to overlay the macro and understand.

Yeah, I think we can talk about and I mean I think.

High level, you know in the past several quarters three quarters, probably we've talked about SMB being a challenge China being a challenge.

How that's impacting in any given period.

But as we said I I'd be surprised if we had a.

I wouldn't be surprised if we had a similar.

I think that continues.

And particularly pockets of SMB, our arena business, just not at the growth level. It was previously.

Guidance set up to last year. So we think that you know.

Whatever low to mid teens growth is.

But that's not new news, that's kind of the near for multiple quarters already.

Sustainable.

Alright, Thanks again.

And I think in Europe , we're actually surprised at how well we're doing given some of the macro data points the <unk> stuff like that so.

Yeah.

Your next question comes from the line of Adam Borg with Stifel. Your line is open.

Awesome. Thanks, so much for taking the question.

It's sort of the same story as before you know inside a uncertain environment Theres a few pockets of weakness most of the most of the Geos and products are kind of doing just fine and then theres. Some real pockets of strength to you know like we've said before our aerospace and defense for example happens to be a pocket of strength.

Maybe just on the macro again I know you didn't want to talk our Christian at one o'clock.

Explicitly around bookings trajectory in the quarter, but maybe you can talk a little bit more about the macro overall, how sales cycle changed in the quarter at any changes by geography or vertical.

Yeah, I think we've talked about and I mean I think.

Medical device happens to be a pocket of strength. So you know.

At a high level you know in the past several quarters three quarters, probably we've talked about SMB being a challenge China being a challenge.

It's kind of a mixed bag.

It nets out for the year or two.

Less favorable than I'd want to be and I said, we did slow down a bit I mean, we exited last year with 15% growth in the in.

I think that continues.

You know I'm, particularly pockets of SMB and our our arena business is not at the growth level. It was previously.

And this year at the midpoint, where we're calling 13, but the year is 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 would tell you what that's pretty darn. Good in this environment and it's certainly better than any of our peers have been able to do in this environment. So we feel proud about it and feel confident going forward that this is a very.

But that's not new news, that's kind of the near for multiple quarters already.

And I think in Europe , we're actually surprised at how well we're doing given some of the macro data points the <unk> stuff like that so.

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 theres. Some real pockets of strength to you know like we've said before our aerospace and defense for example happens to be a pocket of strength.

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 is all of that business kind of is trickling in now.

Medical device happens to be a pocket of strength. So you know it's it's.

It's kind of a mixed bag.

Because people have authorization to go.

I think it nets out for the year or two.

Forward with this project they've had sitting on the shelf for a while so we saw this in 2009, we saw in 2000 22020, Q2, and Q3 were pretty weak and we had a blockbuster Q4 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'll be probably will get.

Less favorable than I'd want to be and I said, we did slow down a bit I mean, we exited last year with 15% growth in the in this year at the midpoint, where we're calling 13, but the year is not over.

So it could be we lose a point point and a half of growth. This year two points, maybe I don't know, but I'd tell you what that's pretty darn. Good in this environment and it's certainly better than any of our peers have been able to do in this environment. So we feel proud about it and feel confident going forward that this is a very grew.

A surge of strength.

Some of these projects that have been held back by the customers get funded again.

Great. Thanks, so much.

Growth.

Your next question comes from the line of James Lee Showered with Griffin Securities. Your line is open.

Oriented sustainable resilient business, and it's not likely to change dramatically from that.

Thank you good evening.

Jim Neal.

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.

One of the interesting things about your closed loop lifecycle management strategy.

Is the multiple forms of associated witty across the product line.

When the environment improves we get a surge.

Is all of that business comes trickling in now.

And with that in mind and at the risk of asking a which of your children do you favor the most questions.

Because people have authorization to go.

Hi.

What do you think is the next big thing in closed loop lifecycle management has it.

A L M P. L M and that's the Lam is it perhaps CAD and simulation SPD ammo.

All of the above but how do you think about where the.

Surge of strength and some of these projects that have been held back by the customers get funded again.

The next big thing in terms of incremental growth of share might be and then if I could just add to that related to share. It's been demonstrable that you gained share in your two biggest businesses Kadhum T O M.

Yeah.

Great. Thanks, so much.

Your next question comes from the line of James Lee Showered with Griffin Securities. Your line is open.

SLM and <unk> smaller arguably more fragmented businesses. So how do you think about gaining share in both of those.

Thank you good evening.

Jim Neal.

One of the interesting things about your closed loop lifecycle management strategy.

Yeah, I think I'll take that one Jay it's probably not fair yet to pin that one on Neal, but maybe on the next call but for this call I'll take it.

Is the multiple forms of associative witty across the product line.

So I think first of all I don't want to pick one thing and that's kind of a message here is that it's not like there's one good thing happening at P. D. C. There's a whole stack of good things, but nonetheless, I think you would agree we have a very strong P. L M position and we've been taking share for years with BLM intact.

And with that in mind and at the risk of asking a which of your children do you favor the most questions.

Hi.

What do you think is the next big thing in closed loop lifecycle management has it.

A L M P. L M and that's the Lam is it perhaps CAD and simulation SPD ammo.

Suggested Quinn from from third place to second place in and then I think we've gone in the first place.

All of the above but how do you think about where the.

So.

The next big thing in terms of incremental growth of 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 Kadhum T O M.

<unk> is a strength and I don't see that dying anytime soon.

Said, we acquired a real strength in a L M with gold Beamer and that is a hot market.

Particularly in some places like automotive, which is a massive industry.

That's the lemon smaller arguably more fragmented businesses. So how do you think about gaining share in both of those.

Think most of you know there's three to four software engineers.

Per mechanical engineer in automotive development right now.

Yeah, I think I'll take that one Jay it's probably not fair yet to pin that one on Neal, but maybe on the next call but for this call I'll take it.

Across all companies. So that's a hot place to be and we have a hot product in cold Beamer.

And then I'd say in SLM.

You know, we have an offering thats pretty much unmatched and particularly so when you take a service Max the strategy, we outlined at LIBOR ex service matched with our pretax with sort of it just takes with thing works Iot with before I E are theirs.

Nothing to go against that frankly, and certainly not anything model base closed loop lifecycle I mean, the nearest thing we could point to in our competitor there would be like <unk>, which is kind of a Swedish mainframe company, not really so or 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.

Suggested Quinn from from third place to second place and then I think we've gone in the first place.

So.

<unk> is a strength and I don't see that dying anytime soon now that said, we acquired a real strength in a L M with gold Beamer and that is a hot market.

Particularly in some places like automotive, which is a massive industry.

He of advantages, we've been developing and and will play out in our favor.

Most of you know there's three to four software engineers.

Okay. So Jim given your long tenure I was going to ask you about something you mentioned to me in 1999, but it can wait.

Per mechanical engineer in automotive development right now.

Across all companies. So that's a hot place to be and we have a hot product in cold Beamer.

At that time.

[laughter], Yeah, Jay My 10 years almost is locked.

And then I'd say in S. L M.

[laughter].

You know, we have an offering that's pretty much unmatched and particularly so when you take a service Max the strategy, we outlined at LIBOR ex service Max with Arbor taxed with server just takes with.

Okay. Thanks, guys.

Yeah. Thank you.

Your next question comes from the line of Joshua Tilton with Wolfe Research. Your line is open.

Hey, guys. Thanks for thanks for sneaking me in here and congratulations to both of you.

<unk> works Iot with before I E. R. Theres, just nothing to go against that frankly, and certainly not anything model base closed loop lifecycle I mean, the nearest thing we could point to in our competitor there would be like <unk>, which is kind of a Swedish mainframe company, not really so or Siemens or anybody like that so I think we have some real.

Jim You mentioned you have a hot product code Beamer.

We keep hearing nothing but positive thing.

Chance you could just give a little bit more color on how it performed in the quarter and I understand that it is officially organic mcchristian, maybe maybe just any sense for how contributed to <unk>. This quarter and what you guys are baking in for its contribution in <unk>.

But again I don't think there's one I think we have a portfolio of advantages, we've been developing and and will play out in our favor.

Yeah, So I mean at a high level.

Okay. So Jim given your long tenure I was going to ask you about something you mentioned to me in 1999, but it can wait.

We had a previous offering called integrity, which.

Had aged let's say over the years and code Beamers are much newer kind of cutting edge product has got great functionality, great usability supports all the agile principles that.

I'll say, that's fine [laughter], Yeah, Jay My 10 years almost is locked.

[laughter], Okay. Thanks, guys.

Yeah. Thank you.

You know embedded software developers also want to adopt now, but 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.

Your next question comes from the line of Joshua Tilton with Wolfe Research. Your line is open.

Hey, guys. Thanks for thanks for sneaking me in here and congratulations to both of you.

Jim You mentioned you have a hot product of code Beamer.

We've been doing very well with these big auto companies that you would all know.

We keep hearing nothing but positive thing any chance you could just give a little bit more color on how it performed in the quarter and I understand that it's officially organic mcchristian, maybe David just any sense for how contributed this quarter and what you guys are baking in for its contribution in <unk>.

You know the names of them.

And I think we're going to land a few more here in the coming quarters, but.

It's certainly been accretive I said last quarter. If you remember that we had 13% growth, but you know if you had let me look at cone beam or a little differently. It had been 14 and now this quarter is 14. So you see the cold beamer, 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.

Yeah. So I mean, that's at a high level.

We had a previous offering called integrity, which.

Had aged let's say over the years and code Beamers are much newer kind of cutting edge product has got great functionality, great usability supports all the agile principles that are you.

Yeah.

[noise].

Your next question comes from the line of Ken Wong with Oppenheimer. Your line is open.

Embedded software developers also want to adopt now, but 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.

Great. Thanks for thanks for sneaking me in as well.

So this question I'm not sure if it's.

Kind of appropriate at this stage Neal, but I mean, Jim has established a pretty well deserved reputation for delivering on cash flow and EPS in a past life.

We've been doing very well with these big auto companies that you would all know.

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.

Although the names of them.

And I think we're going to land a few more here in the coming quarters, but.

It's certainly been accretive I said last quarter. If you remember that we had 13% growth, but you know if you had let me look at cone beam or a little differently. It had been 14 and now this quarter is 14, so you'll see that called beam or 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.

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 and moving the family out in.

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 the business clearly in this transition with all the great things Jim has 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.

Yeah.

Your next question comes from the line of Ken Wong with Oppenheimer. Your line is open.

Great. Thanks for thanks for sneaking me in as well.

Feel really confident about what we've put forward based on the momentum based on what I see I am very much supportive of how K T is 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.

So this question I'm not sure if.

Kind of appropriate at this stage Neal, but I mean, Jim has 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.

New it's actually me having to spend meaningful time here, making sure I was comfortable with the things that we heard on the call in 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 our free cash flow something we stay very much focused in on.

Okay. Thanks for the question appreciate it in.

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 move in 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 the business clear in this transition with all the great things Jim has 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 I can add in to give them. Some kudos here. He is ahead of plan on the free cash flow.

I'm sorry mismatch.

So you'd get.

You know that cash flow cash flow comes from growth and careful application of spending.

And that is ahead of plan.

And feel really confident about what we've put forward based on the momentum based on what I see I am very much supportive of how K T is 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.

And demonstrated the EQ not to answer the previous question about which of Jim's children do you like.

[laughter].

Appreciate the insights guys.

Your next question comes from the line of Daniel Jester with BMO capital markets. Your line is open.

Great. Thanks for taking my question.

Congratulations on the on the first cross sell a service Max which I suspect on a different call might have been highlighted more in your opening remarks, maybe you could just spend a minute providing a little more context kind of how that deal came together and as you think about accelerating the cross sell opportunity.

And I can add in to give them. Some kudos here. He is ahead of plan on the free cash flow of I'm.

Im sorry mismatch.

Any sort of learnings or strategic.

So he gets it.

Adjustments you've made as you've got this first deal across the cluster door. Thank you.

You know that cash flow cash flow comes from growth and careful application of spending and is ahead of plan.

Yeah, Great question.

The children over time will be constructively across the whole digital thread, but in this regard of Servicemaster S. L. M. The cross sell value that we're seeing and the momentum that we're building in a material deal that we closed out this past quarter was an evolution of our already significant customer of <unk>.

And demonstrated the EQ not to answer the previous question about which of Jim's children do you like.

[laughter].

I appreciate the insights guys.

Your next question comes from the line of Daniel Jester with BMO capital markets. Your line is open.

A P T C 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 Servicemaster when we put the companies together went through live works and explain the closed loop model base closed loop digital thread strategy with <unk> and SLM and the things that we could do provide value for the <unk>.

Great. Thanks for taking my question.

So congratulations on the on the first cross sell of service, Max 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 learning.

Customer it was a no brainer and there is no competitor that the actual industrial manufacturer out of Europe here had a choice to actually go to someone different and so that threat and what we're doing to answer your second part of your question is across the collective customer base that has P. L M and all the other categories of PTC.

Things are strategic.

Adjustments you've made as you've got this first deal across the cluster door. Thank you.

Yeah, Great question and the children over time will be constructively across the whole digital thread, but in this regard of Servicemaster S. L. M. The cross sell value that we're seeing and the momentum that we're building in a material deal that we closed out this past quarter was an evolution of our already significant.

So 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 have been.

Customer of <unk>.

And articulate our strategy and I think that one was fortunate because life works.

It made the light bulb come on and then we had a very short sale cycle. So.

I certainly I certainly hope we can have.

We have other such short sales cycles, that's atypical.

It was a no brainer and there is no competitor that the actual industrial manufacturer out of Europe here had a choice to actually go to someone different and so that threat and what we're doing to answer the second part of your question is across the collective customer base that has P. L M and all the other categories that P. T C L.

But I think the lightbulb went on for a lot of companies that lifeworks.

There was a lot written about it if you've seen that so it was great support.

For the concept of the physical and digital the closed loop.

Model base closed loop product lifecycle management concept.

So I'm I'm very optimistic and there are numerous deals in the pipeline. They just didn't have the closed quick enough to get done in the quarter.

Old 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 have been.

Great. Thank you very much.

Your next question comes from the line of a second calia with Barclays. Your line is open.

Awesome, Hey, guys. Thanks for taking my question here and congrats.

Particularly as our strategy.

Congrats Jim and Neal and on irrespective next phases.

I think that one.

Was fortunate because life works may.

Right.

It made the light bulb come on and then we had a very short sale cycle. So.

Sure.

Listen most of my questions have been answered, but maybe one one for Christian.

I certainly I certainly hope we can have.

Anything to note on pricing here Christian I know the last couple of years have been responsive to the macro backdrop right now.

We have other such short sales cycles, that's atypical.

But I think the lightbulb went on for a lot of companies that live works.

There was a lot written about it if you've seen that so it was great support.

No not necessarily.

Are you using that as much during tough times are also responding with inflation during more inflationary times anything to note more recently on pricing or how youre thinking about pricing going forward.

For the concept of the physical and digital the closed loop.

Model based closed loop product lifecycle management concept.

So I'm I'm very optimistic and there are numerous deals in the pipeline. They just didn't have the closed quick enough to get done in the quarter.

Yeah, Hey.

Thanks for the question.

I do think you know as the.

Great. Thank you very much.

Yeah.

CPI continues to trend down.

Your next question comes from the line of a second Korea with Barclays. Your line is open.

And we.

We started to see a little bit more stability in the overall macro environment that will also be reflected in pricing strategy.

Awesome, Hey, guys. Thanks for taking my question here, and congrats Jim and Neal and on irrespective next phases.

So I would expect that we would see normal kind of normal price increases.

Right.

For sure.

You know again absent some.

Listen most of my questions have been answered, but maybe one one for Christian.

Abnormal extremely abnormal.

Anything to note on pricing here Christian I know the last couple of years have been responsive to the macro backdrop right like not.

You know macro situations, but that's what I you know I would expect we'd start to see more normalized pricing action.

Similar to what we did.

Similar to what we've done.

Really.

You're using that as much during tough times are also responding with inflation during more inflationary times anything to note more recently on pricing or how youre thinking about pricing going forward.

Prior to <unk>.

Covid.

Understood. Thanks, guys.

Your next question comes from the line of Andrew <unk> with Bank of America. Your line is open.

Yeah, Hey.

Yes, Hi, how are you guys.

Thanks for the question.

Got it.

I do think you know as the.

Hey, Jim Neal congratulation on that transition.

Yeah.

CPI continues to trend down as you know in the in the <unk>.

Just a question.

I know you guys have.

We started to feel a little bit more stability in the overall macro environment that will also be reflected in pricing strategy.

A number of AI offerings, I think Korea, or China or design I think for you for expert capture I think he is a semi AI.

So you know I would expect that we would see normal kind of normal price increases.

I think AI with their thing works.

You have thus far a while are you getting more customer inquiries.

You know again absent some.

Abnormal extremely abnormal.

Given where this AI news cycle and is this enough to start moving the needle.

Macro situations, but that's what I you know I would expect we'd start to see more normalized pricing action.

Yeah, you know I don't think it's it's ready to be a layer and 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 you know what is a I mean to.

Similar to what we did.

Similar to what we've done.

Prior to <unk>.

Covid.

Understood. Thanks, guys.

Your next question comes from the line of Andrew <unk> with Bank of America. Your line is open.

The engineering and Theres a lot of work going on at PTC as you would expect say what else could we do.

Oh, Yes, hi, how are you guys got.

And of course, there's two dimensions of that what can we do in our products that we create more value for our customers and then secondarily what can we do in our operations that would make us more productive. So theres a lot of things happening here and then we do have these three capabilities in the market already so I.

Hey, Jim Neal a congratulation on that transition.

Just a question I know you guys have.

A number of AI offerings, I think Korea, or China or design I think <unk> expert capture I think he is a semi AI I think AI with their thing works.

I don't think that deserves yet to be a layer in that layer cake of our growth drivers, but you know hey, let's try it and develop it into one I know that's on Neal's left.

You had this for a while are you getting more customer inquiries.

Excellent and just a follow up question what areas have you been adding incremental spending year to date.

Given where this AI news cycle and is this enough to start moving the needle.

Yeah, you know I don't think it's it's ready to be a layer and the layer cake, yet Andrew but it 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 you know what is a I mean to to engineering and Theres a lot of work going on at PTC as you would expect.

Hey, Andrew It's Christian.

Alright.

Okay.

So if you're referring to the comments that we were you know so.

Talking about about kind of increased investment in the back half.

And our growth drivers.

That's been primarily in continued investment in our winter plus.

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 theres a lot of things happening here and then we do have these three capabilities in the market already so I.

And in co beamer.

In particular to name to name a couple.

Excellent Thanks, a lot.

Okay.

Your next question comes from the line of Nathan <unk> with Baird. Your line is open.

I don't think that deserves yet to be a layer in that layer cake of our growth drivers, but you know hey, let's try it and develop it into one I know that's on Neal's left.

Hi, Thanks for taking my questions and like everyone else that congrats to Jim and you put your upcoming rose.

A question just a question on <unk>.

Excellent and just a follow up question what areas have you been adding incremental spending a year to date.

How have you mentioned that we're seeing the weakening macro numbers and the global manufacturing PMI is I was wondering.

Hey, Andrew It's Christian.

If and when we do start to feel the pressure from.

Alright.

Yeah.

Sometimes decline I'm not crazy.

So if you're referring to the comments that we were you know.

Which aspects would you start to sell.

Talking about about kind of increased investment in the back half.

They are under pressure it would it be a new business or would it be when you. When you contract customers are committing to a lower level.

And our growth drivers.

That's been primarily in continued investment in our winter plus.

Contract values, and what you would've expected them to and then in terms of.

In in code Beamer.

Percentage points, how much would be at risk.

In particular to name to name a couple.

Excellent Thanks, a lot.

We're starting to see macro pressures in the performance fees.

Your next question comes from the line of Nathan <unk> with Baird. Your line is open.

Okay.

Yeah, I think maybe I'll try a stab Christian you can help so.

Hi, Thanks for taking my questions and like everyone else congrats to Jim and the upcoming roles.

So I mean, the factors that build up a R. R. You know fundamentally bookings and churn, but we leave deferred and all that stuff out of the discussion for a minute.

A question another question on <unk>.

You've mentioned that we're seeing the weakening macro numbers and the global manufacturing PMI is I was wondering.

We've seen no evidence of increased churn and 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.

If and when we do start to feel the pressure from.

From those declining I'm not crazy.

Which aspects would you start to.

So.

I just feel like our software when it goes into production has always stayed in full production in.

They are under pressure it would it be in new business or would it be when you. When you contract customers are committing to a lower level.

In terms of at least anyway churn rates being the same.

Contract values than what you would've expected them to and then in terms of.

So.

So I'm going to take that off the table I just there's no data to three down cycles to suggest that's vulnerable.

Percentage points.

How much would be at risk.

We're starting to see macro pressures and the performances.

And then as you go to bookings I mean, we've been clear we've already seen some pressure in pockets and and when Kristian said.

Okay.

Yeah, I think maybe I'll try a stab Christian you can help so.

Sometime ago that we our expectation was flat organic bookings for the year, while we had probably hope to do better than that so.

I mean, the factors that buildup a R. R. You know fundamentally bookings and churn, but we can leave deferred and all that stuff out of the discussion for a minute.

I think I think that's where we'd feel the pressure.

But again, we gave some scenarios a year ago. When we guided this 10 to 14 and said we can actually withstand.

We have seen no evidence of increased churn and 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.

Quite a bit of bookings pressure and still deliver some pretty impressive results and off that some pretty impressive.

So I.

I I just feel like our software when it goes into production has always stayed in full production.

Our 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.

In terms of at least anyway churn rates being the same.

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.

So.

So I'm going to take that off the table I just there's no data through three down cycles to suggest that's vulnerable.

Which kind of matched more or less what we saw in 2009, but of course, the metrics were a little bit different than but anyway, we sort of feel like.

And then as you go to bookings I mean, we've been clear we've already seen some pressure in pockets and.

When Kristian said.

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.

Some time ago that we our expectation was flat organic bookings for the year, while we had probably hope to do better than that.

No.

I think.

The nature of the business.

That's where we'd feel the pressure.

And we're I mean, we're in a difficult environment right now you kind.

But again, we gave some scenarios a year ago. When we guided this 10 to 14 and said we can actually withstand.

Kind of hit on that point.

Thank you very much helpful.

Quite a bit of bookings pressure and still deliver some pretty impressive results and off that some pretty impressive.

Yeah.

Okay Man.

I'd like to turn the call back to Jim for closing remarks.

Okay, great well. Thank you all and thank you for the kind comments for both Neil and myself, we appreciate that.

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.

You know a lot of news here, we're gonna be a quite active on the Investor Relations circuit here over the next quarter. This current quarter.

So you can go back and review that guidance, we're not really trying to guide the next year here, but you know I think that the low end of the scenario was 30% bookings decline.

Starting with call backs, which Neil and I were both participate in a well.

Which kind of matched more or less what we saw in 2009, but of course, the metrics were a little bit different than but anyway, we sort of feel like.

Planning to be in the New York Tuesday of next week.

We don't have the details quite nailed down yet so look for an email from from Matt.

<unk> and then PTC people a various different people are going to attend the Keybanc Virtual road shot show on the 31st of July .

Even in a difficult environment, we can post some peer leading growth rates and off that peer leading free cash flow growth rates.

The nature of the business.

Going to the Keybanc.

And we're I mean, we're in a difficult environment right now you kind.

Annual Technology leadership Forum in Vail on August 7th and the 28th we're gonna be at the Stifel Tech Executive Summit in Deer Valley, and we're gonna as well be at the Citi 2023 Global Tech Conference in New York City on.

Kind of hit on that point.

Thank you very much particularly unhelpful.

Yeah.

Okay Man.

I'd like to turn the call back to Jim for closing remarks.

Okay, great well. Thank you all and thank you for the kind comments for both Neil and myself, we appreciate that.

September six 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 there's a CEO succession is good and healthy and careful and will be continuous.

You know a lot of news here, we're gonna be a quite active on the Investor Relations circuit here over the next quarter. This current quarter.

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.

Starting with call backs, which Neil and I were both participate in a well.

Planning to be in the New York Tuesday of next week.

We don't have the details quite nailed down yet so look for an email from from Matt.

This concludes today's conference call you may now disconnect.

<unk> and then PTC people a various different people are going to attend the Keybanc Virtual road shot show on the 31st of July .

And look forward to seeing you on the road or at the next earnings call as the case.

Going to the Keybanc.

On September six 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 there's a CEO succession is good and healthy and careful and will be continuous.

And everybody is 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.

This concludes today's conference call you may now disconnect.

Yeah.

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