PTC - Earnings call transcript Q2 2018

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Operator

Good afternoon ladies and gentlemen thank you for standing by and welcome to the PTC 2018 Second Quarter Conference call.

During today's presentation all parties will be in a listen-only mode.

Following the presentation the conference will be opened for questions. Today's call is being recorded.

If you have any objections you may disconnect at this time. to Vice call President like Fox, to now Senior PTC's of would turn over the Tim I Investor Relations. ahead. go Please

Tim Fox

Good and Shue quarter thank PTC's and second conference welcome XXXX call. afternoon, to you

Chief Investor call call today and call our a audio today Web Chief Chief Andrew Barry Jim On will broadcast later Financial Today's live on the and conference are Officer; Officer. webcast the be being site. Executive available replay Heppelmann, Relations Officer; of Miller, is Strategy an Cohen, through

as PTC the in actual guidance forward-looking events, the from During to results forward-looking deal because forward-looking as materially to with press will from only in cause be guidance other most this valid Securities as and on these XX-Q PTC can recent statements future Annual call, call make such statements. XXXX assumes PTC's April differ update provided materially Report of statements Information Commission future found actual and and as forward-looking XX-K, quarterly obligation with the Form statements based differ in no XX, the are including projected U.S. including results concerning may The on forward-looking operating to well those reports statements. in factors results filings during Form those could statements that today Exchange release. today's

CEO, over Heppelmann. site. With to would available in press The Accepted the made Web Principles. our measures. can financial Jim turn to to are During Accounting in on Investor like of found financial non-GAAP with PTC These measures Relations I be non-GAAP measures PTC's this Generally discuss directly today's will call, GAAP not prepared the the call comparable most that, accordance measures reconciliation non-GAAP release

Jim Heppelmann

perspectives begin Good afternoon some of the quarter. and review in that with second to us. you Tim. like then quarter joining the provide we everyone achieved on significant the results the Thanks I'd milestones for thank and

earnings continue we above against in high-end the ARR was initiatives came guidance. strong revenue quarter. major financial strategic the QX XX% is to share and XX% quarter Momentum during of our and around strides with in make Our performance fifth per of margin each important progressed operating This our the and recurring software Total growing consecutive year-over-year. growing ARR deferred XX%. revenue double-digit QX model revenue growth. grew our Revenue, further

guidance. growth XX% our this have forecasted early instead of us of bit than one had of We deal larger which going quarter. our We that large revenue in landed demonstrate otherwise QX, forward. business million, which the of our bookings more recurring be at of high-end would $XX guidance. unpredictable. a clearly Timing the that closed deals delivered Importantly the great midpoint These can of was platform software we've near QX was established results for a a part in solid

However, remain To our we're first bookings 'XX. remainder commentary for half QX, on see of to bookings year committed target in growth the performance fiscal my our double-digit pipeline strong and summarize the value, margins. pleased around convert three I for the discussion with subscription model; a three designed increase to my shareholder growth; number strategic orient number top-line are, expand will to our to two initiatives maximize our again to a and number long-term our which to one

progress start the let on growth So discussing front. our by me

our our performance. of year, fiscal first comments frame we're that Given at around half I'll my the midpoint

mega the overall, $X grew early currency million close in X% XX% deal, for of half out and currency First last bookings at the X% year. called of we adjusting when end constant constant QX the in

half of XX% bookings year. the that last recall in You grew first year we the

of strong well XX% first against compare. has X% delivered XX%. last growth America good are performance against Europe strong a against reasonably very year Also 'XX growth. growth. in bookings very flat also From we the Europe's had in bookings but year-over-year expected on So half in currency, fiscal with QX. was QX constant where half perspective, tough in early year-over-year Europe had instead the we as very constant performed significantly sequentially a deal $X performance geographic we QX approximately growth impacts of currency and in first we first perspective million closed half down mega

deals throughout at which our PLM in year We quarter the primarily the the is in coming of guidance start the the reflected of segment. our expected timing based was pipeline and on it from this large

Performance constant strong QX, been For on APAC path for Korea. performance a sequential full bookings step significant by its half deal appears driven significant progress with of Europe recovery pipeline. in by Taiwan driven has solid growth calls in has sequential large Japan be and currency we made expect first growth. usual in as tracking to China, modest delivering up bookings growth QX, X% its to year which from continued to QX plan to and

performance. business our unit to now Turning

of by start quarter highest contribution XX% for which discussing and IoT, year-over-year by driven another figure good business. our about expansions. We bookings strong [indiscernible] number grew accounting deals the Let's expansions these our half six growth had with customers from is of

growth first estimated If from is revenue compounding now in that's software XX% in rate, posting growth to XXXX, a starting market for XX% and with our figure the of. subscription XX% deal growth reflecting of QX half we've benefit sequential to of X of you model fiscal IoT XX% recurring exclude happen. bookings growth IoT line year-over-year maturing spoken QX mega the the growth accelerated 'XX

I'll where what we all Industrie and of vertical being me smart examples geographies wide put use into is some automation. connected operations, factory customer Let start call SEO, technologies share the leading that with production. are which highlight cases X.X IoT PTC's industry variety markets,

European the next in new aggregates ThingWorx to who they analytics from new leveraging delivers a airframe is complex its called based aerospace ThingWorx Exxon targeting is Industrie condition provide what enterprise ThingWorx companies operational maintenance we plan across in the SEO an with market, Americas is to their operational disparate that and optimization. Meanwhile intelligence, shop apps factory insights to operators. efficiencies silos analyzes And and in leading through of in deploying part closed systems guide order build extend procedures up of During the asset a space floor AVEC the we connected company entire application of This operators XX environment to manufacturing the the defense closed quarter, Americas, improve drive and using deployment initiatives Also launching global an and call footprint. which deal Airbus China, ThingWorx long-term to food Mobile production latest plants expansion in the and is in operational quality. over XX assets, beverage manufacturing months. by with deal to X.X one and their expansion

large the global brewing customers can of for field. one expansion company report what Carlsberg. two is very with highlighted the tangible a the already greenfield with deliver beverage new one we food on both in Lastly, to rapid providing company market a of PTC I'm quarter PTC and with wins evidence manufacturing that and last process that have deals ROI Swiss-based pleased recall signed that ThingWorx

case what for call expansions traditional engagements. we SCP, the Turning to which products and meaningful smart, use of a IoT. new number connected We closed is

surgical part which with reducing and from medical and by global lead improved the other enhance customer deal processes more PTC signed expansion customer doctor connect planning Medtech management, shortages is efficient integrating operations and generation parts. an of product has space, critical enabling parts systems existing one improve Airlines service management goal of parts In shows the Southwest the outcomes. data their long device our device ThingWorx an ultimately patient Boston-based next to to platform

in Behind a MR. platform lot going which the gate testament Microsoft VR beyond IoT ThingWorx see to On enablement combination their front, of HoloLens We PTC Reality in both elevators. that complementary will a signed were with the of of there's the smart, Hub around ThingWorx with of with January, maintenance and the deliver commercial connected Microsoft product a around exciting to quarter this our of as we important significant for engagements the IoT several early pipeline scenes joint-win right and what that of the close the together the ThingWorx Mixed or calls out partnership collaboration predictive This and you partnership globally the remember and advanced exciting with a is together yield and Dynamics we base condition and collaboration, Microsoft Microsoft's deploy installed out service. a AR And Azure scope partnership sales Microsoft connected on with stack to partnership both Microsoft's technology generation It's industrial elevator companies on next teams collaboration pleased happening to field see late in result with there's new IoT the that front Azure aligns well-known strategic success of a of Microsoft that IoT. the work to know company delivered into across market. Microsoft the company. based the lot teams extends Azure of with including power

a ThingWorx IoT ecosystem least demonstrations. instructions, this use number Microsoft parts AR at around service and nearly for of momentum as PTC of has of core in and defense XXX,XXX across surpassed has being product at & a the including studio technologies. manufacturer across interest the like touch landed Reality, aerospace growing QX Vuforia Mixed all operator to Briggs on developers With use ThingWorx We the pace complementary as the a and which enterprises now that pillar So wins of instructions factory of together. developer seeing production an Vuforia purchased now largest is driving and Vuforia range types relationship, the who Cannondale industrial acts studio Stratton, other knitting we or maintenance but settings. our technology number is I'd test PTC emerging virtual which cases speaks is have world's into and well a multifaceted have different as for Vuforia to based X,XXX industrial really in leaders the broad cases. the production AR based including on as industrial and put accelerating

sky While we're leadership is commercial cases. from industrial adoption becoming customers provided that adoption QX to days AR, range To differentiator geographies have IoT and major across for proof point summarize strong technologies these we it's seeing for early AR, companies still and a markets, of of high a Interest vertical position. are and a very accelerate. on strategic wide begin another use levels

of Our partners these like further growth markets. ecosystem growing including in strengthens position exciting Microsoft PTC's leadership players major

nine growth our very remains consecutive product year quarters our outlook strong. solutions Let me by go-to-market market in channel turn from strong our business. offering. initiatives rates as now bookings have continues of double-digit to well CAD for bookings Year-to-date benefit reseller the very growth of as considerably balance CAD evidenced our and outpaced optimization the now to a

On manufacturing are integrated integrated are in or also capabilities new the breakthrough Such introduces CFD. CAD for Computational X time. in XD is optimization. These printing delivers X March. Creo if Dynamics for product or launched front, we capabilities fully you Creo the additive prefer. It Fluid Creo that topology the first

As CAD the with in reckon improvements enhancements mold world full X it a productivity with. multi-CAD PTC and significant and our to Creo of force is Creo forward remains shows release for a for Creo the major machining areas X every step is of that collaboration. users including

deals expected in in large strong a timing PLM the QX had the as QX we declined due Following of sequentially pipeline. to

at PLM basis, the pipeline deliver and On fiscal market tracking rates. a strong half backup expect of and have for to The the this are market looks we first or back full PLM good a half 'XX the business bookings growth above growth year rate. at

been Airbus a at our management our may results recall parts and & Finally, for number by business of which SLM you QX expectations Whitney. posted Pratt quarters in has highlighted solid performing service below wins

recall on reorganized the balance To that front, on double-digit SLM team growth the that leadership and based bookings improve will outlook of encouraging. software of our to the a deliver year. commentary quarters You close-off under this revenue and first is good the and the several we to my off signs year, are fiscal the expect business ago new half for very respond and recurring the growth we for year the start will

is value, Let to me our drive to to our turn level top transition initiative model. business subscription which now shareholder a second

the want in XX% due of subscription The points in in large the basis XX% ago, up that of than Our despite a revenues was the slightly the of revenue guidance one mix X,XXX the Overall, past QX deal reflecting confidence and also Western to momentum license pleased QX mix to we just this sales I QX. software to software our level QX end slipped we're QX and beginning XXX of the was with grew points quarter that recurring highlight And high software XX%. below long-term to-date. Americas professional from our Europe. have a subscription recurring our transition year targets. XX% subscription our revenue basis was very subscription higher highest our in still and that around

me today's to-level initiative is that very in Matt in do, QX high-end our professional operating Let discussing new will services point which achieving our To our to milestone that but you higher. guidance of because single-digit services the agree to I the toward by march confident I first I third to the I'm of basis sluggish aim prove and most is a XX% shareholder and the QX, by margins for but was the And of my team margins, to ask time to XX% to few business. 'XX. was norm, further been steady important points used would start, Matt quarters years. comments margins. XXX above take to wrap-up a range, they will them increase once and of a services that out the like team drive XX% long congratulate have his QX out. operating more we an are that captive we course, hit value, and for of that over improvement service tracking In margin surpassing we'll trust the to which It ever professional want for XX% promising margins prove target been a it's from we've of Cowen services margins best-in-class

margin coming As 'XX our In maturing and margin our of long subscription subscription fiscal we continued and the into driven accelerating multiple progress the to to 'XX, fiscal closing, then, half rapidly beyond expansion to transition, reinforce years I'd of expansion we like operating model in compounding by continue the through expect the achieved to deliver plan. benefit in of commitment play. range back

transform into the to in the have software of PTC one world. companies premier We

will long growth and achieve XXXX, will revenues says plan out event updated we're track billion and added plan rates substantial plan give targets where an have in to At by through June, current investor you we the XXXX view that Our margins $X to our XXXX Boston, that we give embedded XXs. we our double-digit Lifeworks an the transparency approaching low in with to over value to our engine shareholders. extend range creation building for in

I think that, business to over of us. review all transition how effects behind looks turn the highlights finally financial the when seeing I'll With you. who business compelling you'll are call the Andy our with will enjoy model

Andy Miller

had not and the Good the end have at that that did would XX% on our million deal I'll bookings bookings Jim. deal despite mix everyone. guidance until close non-GAAP guidance. higher time, a discussing would were large beginning our been Thanks afternoon been of of of and $XX Please note the line results with guidance. our this guidance closed be midpoint forecasted subscription near QX. and If ACV in of have we QX

cash more of against we and when were currency driven we by deals $X large million anticipated QX X% Large the actually the pipeline historically about constant in year. timing levels over compare in As low in grew tough flat deals very the opening expect primarily still guided enter were reported in across we business. as in at a bookings broad material those January, million to based a deals deferred up as large had in With pipeline the in this nearly delivered pipeline. by significantly tick just in the upon April the a January increased we timing and were due an as testament in fifth our bookings QX, back Yet base last year-over-year, we guidance. in strength up was of we the so guidance quarter of on anticipated growth. operating was strong XXX XX%. deferred all double-digit $XXX the the large to exceptionally had deal versus revenue consecutive deferred unbilled flow. bookings million plus reflected or we apples-to-apples free high-end year-over-year which exceeded revenue which this million, Total April an is Billed billed Recurring margin our and revenue end, Revenue, would've EPS year. XX increased ARR XX%. about billings X on year of billed $XX the XX% grew March year X the basis, quarter quarter X%

from You ARR guidance will expect $X billion our next that to we see quarter. hit in

well that XX subscription many We QX will quarter. program over in conversion channel, base the customer to with to continues program with substantial the support traction opportunity and years. their Our our launched 'XX contracts our to in within customers support XXX the enterprise in play gain conversion converting to progress and continues is believe we that conversions new continue out

Turning to QX up revenue launching program at fiscal beginning of total fifth the above quarter of is of guidance well the subscription statement, $XXX the revenue our million was us. year-over-year. year-over-year million high-end growth subscription was the of quarter XX% highlighting trough the income 'XX our and since $X behind that second

revenue quarter point expense XX% of range XX% recurring year-over-year increase and of Software above $X.XX EPS grew software mix. and QX points $XXX was XX%. milestone to crossed XXX within our Operating margin was guidance XX%. XX% $X.XX million range was guidance. basis high-end the XX guidance threshold. in operating of our second the was revenue the above our revenue XX% the first up grew total we XX% in our was a revenue despite time Subscription recurring, of basis subscription QX a software Approximately of

at for accelerated cash $XX and the that we 'XX million million $XXX million to million Moving repaid QX and today we to April XX that be announced repurchase of beginning quarter debt. $XXX $XXX will the we were investments stock expect $XXX flow program million was up executing Free this quarter. and from the we balance sheet, on a complete cash

turning guidance, flow to bottom there cash QX QX. since guidance. are in top change to deal free our as Now large we was as early full bookings line And raising that is no from closed well and slipped guidance the year

mega right bookings XX% expect QX. during of represents or year-over-year year deal to continue We of when range of million last that million million. that of closed $XXX for growth to This in X% end XX% $X to adjusting XX% $XXX instead to at the the

subscription expect the full to year for in exit a of expect mix continue the We and XX% to XX% year the range. mid

XX%. software subscription software expected 'XX revenue Note exceed of the at We've to We grow expected a in recurring than is is guidance to recurring XX% year-over-year. billion the million midpoint guidance grow growth of revenue driven increased expect revenue the mid last for fiscal basis million billion $X.XX increase total to grow we 'XX recurring Total And previous XXX mix that subscription revenue. XXX of in now of year. revenue $X.XX $XX of X% is year. our ARR approximately to $XX expected our to of to teens. by million expect despite X,XXX XX% software to a higher an million software revenue software Fiscal to revenue increase XX% points full total

midpoint. year, over the our compounding of is expect to business to model XX% beginning of margin XX% benefit to of years for rate EPS which continue multiple 'XX $X.XX rapid we increase at realized. approximately in We tax $X.XX of With maturing as subscription previous a expect the an XX% fiscal is guidance a with growth of operating X% $X.XX, the XX% our to of acceleration full of

$XXX year-over-year October midpoint. flow We to cash guidance a to of the are to our range be million of flow to free $XX $XXX by X excludes related fiscal XXXX $XXX payments of million cash 'XX million, growth restructuring. now Adjusted at raising to $XXX million which our is million million, cash XX% also expected free

subscription expect to we flow cash free margin, operating as model with fiscal the in accelerate As significantly matures. 'XX

expected $X.XX up operating Turning to to LiveWorx to expenses $XXX sequentially begin million an range With of due Q&A. the million to and in operating that, are of XXX expected the to turn $XXX million. the be be QX, Revenue $XXX expect operator to of over I'll in $XXX million. to $X.XX. XX% commissions resulting million to to the and to QX is call bookings XXX we to million EPS margin XX%

Operator

We session. from question-and-answer Our comes will Instructions] [Operator now question begin Evercore Ken ISI. the Talanian first with

may ahead. You go

Ken Talanian

could question. results talk how the other and Thanks might evolve be for initial taking some you're about partnerships to partnership, from you whether seeing I similar the there was expect if you the works? that Microsoft the in wondering

Jim Heppelmann

Sure.

I signed just So think call. Microsoft last earnings the partnership our was before

two bit execute about So it. basically we months had But we the little anyway, talked a to partnership.

fair that to partner training to and needs us Microsoft we But So, think exciting core into them so is what's see their amount I pipeline in market And as a our happen enablement there's building partner. sees go of as forth. sales, world. and industrial the

And the so because almost trying any time now our which products cloud-based distributed to all together customer in bringing is we're about smart, from products fold. Microsoft bring talking to data cloud. into connected they're we're Then many when the the talking solution, time about a

they take with now a problem pipeline. it have Dynamics So to a wants the to seeing they contribute their an point maybe PTC. customer tend customer when PTC integrated into to And vice deals Azure versa of not, Microsoft maybe and joint apply who is toward lot industrial IoT

started much that and sales presented as it a enablement time positioned PTC doing part most there building. getting But maybe merit for previously the presented had pipeline ourselves saw both couple the let's configuration customer the at and competitors. customers solution frank, in one we such and out were we're maybe say overlap. -- another because Microsoft not a just who and were hoping for But being of So turns and

think we So call. last company others easy The Colfax earnings came that we couple the even there's talked elevator quick and in. of about had I a when few I spoke the deals a of

other the quickly just in couple against perfect that place was positioning solve there's and it because dropped each We could go a problem answer. So the them stop together. of

because excited partnership device a in what loves a the best and bigger have the partnership we're Mixed we HoloLens. lot makes excited also Reality course we Dynamics HoloLens again industrial but have Microsoft of involved that So of think it's and it's a and very whole technology. we're they around IoT,

of stuff there. lots augmented going say reality, So on into PLM on will like that to partnership. Dynamics first our priority. likely and It's I'd pull a focus very not and but exciting this, top energy IoT We'd CAD we and but it's a

PTC us forth ThingWorx don't might in Now, of more partners, at to sell and and and where happy if had similar course, we other credibility point. gave provider don't selling We I for most really Microsoft. Industrie customer need That's of cloud partner product. technology, have technology. this a pretty for of our with a my have amount space But spoken a base view so a automation. we we're but amazing strong we're technology in Vuforia who factory X.X automation of partner to surprising I'm partner could a because a think good frankly that another looking help happen a as very a more had factory lot desire us we've example people

and industrial automation a killer of that a have would So to partnerships be looking But partner of say them definitely we're couple there's I'd want we in all really world of for and industrial Microsoft was partners second. types. one

Ken Talanian

Great.

Operator

Matt Edward Capital question comes with Markets. RBC next The from

You ahead go may

Matt Swanson

last in a the noticed on seeing for To And of seems in your or actually PMI just to previous Matt. Swanson macro versus is this was the strength been like in have behavior Matt subscription you Hey, sort looking you any perspective, the year. of it's just over Thanks. difference then, And historically strong reacting guys it environment. I kind curious model? macros the are that if buying from licensing

Jim Heppelmann

Yes.

have a complicated. they're of We questions very couple got and there

Andy Miller

in for is strong. line economic and little -- down think Europe I the in solid growth backdrop a did example tick they but remains bit still Bottom it's still are territory XX.X. PMIs very Europe

rest the So to year still that in first frankly move to performance territory of in the as the half we risk way pipeline the and a year. Subscription information low the solid see it reduces the in making we because the both bad customer's strong actually well growth in as decision. of as buy economy good preferred at in a a complex is or

because because embed the and their them not success So in they're subscription with when out successful churn can if in we're off. runs they deployment simply

So you'll our frankly this to continue is opportunity our as we rates retention notice -- raised because in is class we best sticky quarter guidance their become the to we to goal path on improve there, have software.

you because recurring So base. to on a to size want rates those programs higher customer performance look revenue to of drive We're it become the best success the in driving will organization when renewal class. we at across the continue have significant impact our financial

where subscription we software together and in run in success model and a it's something perpetual work money as really whereas a the for is the take fundamentally perpetual money and customer So a company.

Jim Heppelmann

quarter to levels big deals the of your must in, come had lot add low that QX historically question means that a a have which and to at of solid the course one it in the small large deal. Yes. And very I part offset might Matt. in even big we Andy deals smaller deals. quarter, were And mentioned of yet second deals small volumes takes offset to big of number of

is seeing transactions. think a out of the this channel high I volume we're what So success proves and

start result grow model One these of transactions lot Andy strong small said. being reason transactions are that business the the seeing time. lot a of I in the over But transactions think as think I and smaller. encourages we're economy in but a then general,

good. in we're and bodes place, great seeing of pretty economy us that good the And I be it downgraded It good, it's a we're but for still from volume to So pretty decent. may just in is really think well transactions.

Operator

comes The question next from Steve with Koenig Wedbush.

go ahead. may You

Steve Koenig

Can okay? guys. Thanks hear me you

Jim Heppelmann

Yep.

Andy Miller

Yes.

Steve Koenig

great. Yes. Okay,

to and So accelerated the your buyback. you thinking around definitely ask want

you if deal at from wondering doing. least to wouldn't in towards seen and smart more types the appreciated. floor that's judging I there at those comments, well quarter, as the more connected The them I'd to BMW expect are ThingWorx that be gate in first much factory you I think Microsoft of Jim mind mean be more to we've of DP love going the in And the if the I'm tilt like did they now while. you on sneak deals. time a Any are products. color tilted do deals, many your

Jim Heppelmann

Okay.

we And the technically because frankly did buy on flow. than street ASR ASR could takes So faster cash the the them. such strong have free share very, very off we

will So the XX, that of also that returned we're price a quarter. buying average of are back to XX% rest discount get the we during half then shares us. And of be the that frankly shares purchased April the

So count share share basically to street the effectively. off faster get reduce just more take we our

You will that actually QX count does see the look at you down that share in when QX.

a They them that's efficient the through way got to stock. for behind So telling It's volatility of of it. algorithms very and the the reason makes buy. us when banks money course the

XXXX. So We that's in why. did it

Steve Koenig

forgotten that. I've Okay.

Jim Heppelmann

SCP question, service, the that's a the we those mean second almost to various little directing where end And require to a is And frankly wanted Microsoft. part up. behind your way definition Microsoft reasons be. our all to catch we're for of partner. And by just then, I we cloud got so solutions

the factory type cloud. premise or work, Industrie premise frankly of And be on could on SEO this today. a either on what X.X do is that deployment lot you If

to to premise market, like get in on I'm look put accepted in maybe but not of cloud. an that the around they on on cloud premise, Microsoft in call give coming a of then want that the think servers. across the cause which has our software which they capabilities story that their important And yet, you answer. So put just out sort could it's that that story wanted over they Microsoft would them board. is that's Azure coming stack might is I more imagine software we time. become us work the and sure Microsoft Azure if fully with part what stack, that primary a our the it own might They

most sold engineering is Now of the frankly departments. into Navigate

Steve Koenig

Okay.

Jim Heppelmann

the And few very departments engineering call are today. in

time. of being the on more over that could more PLM cloud. to most sell up premise in starting and change ends We're So

Steve Koenig

Yes.

Jim Heppelmann

putting And about discussion Azure. our in there's the on PLM cloud a

it good there. of Navigate the happening in quarter. quarter, was We reasonable lots So, of sell did stuff a course

Andy Miller

XX of We are million. north

Jim Heppelmann

So it's that nice a it going would to keep few portfolio. a We and next product. to like park been frankly in more the

Steve Koenig

Great. guys. Awesome. you so Thank much

Operator

from with Vleeschhouwer Jay Griffin comes question next Securities. The

You ahead. may go

Jay Vleeschhouwer

Thanks. Good evening.

Jim Heppelmann

Jay. Hey,

Jay Vleeschhouwer

reason factor engineering, in to Japanese at might besides case. And company U.S. and you have were to one then, selections that I role your let IT for is customers ask to Last as for be your rest imminently or I'm in that the large you convince of these competitors beyond Jim year twofold. consolidation that And of transaction processes where was portfolio. one about the with in BMW sounded you companies you And IoT quick some sure, particularly one the there's and of you're ask like from selection of conference least some vendor's major could a a any development IT your going car having and that major wondering of IT to the company. particular conversations follow-up therefore deployment the consolidate me automotive update vendor. or car any call days a with Microsoft besides it won wondering though a something couple customer manufacturing having me if ago, from did the Toyota. the there seeing since there And just an in they in were to major numerous back be help deciding I'm situations come said company. way perhaps you're I'm And if aerospace last to selections with as in that seemed

Jim Heppelmann

Yes.

Okay.

internal predict your in role So of think their has regarding first department. general of say IT a and have let's ThingWorx role solutions like IT, and of don't To the gone the on have over frank with because degree it's selections. the they cloud IT lessened to hand actually lot to companies board. to like negotiate On one things question Salesforce.com be a all I it

general, I is And IT. there working think now can of that. help in we lot is different cloud OT the organizations than then, you factory So IT through starting in to technology. with a option I forward think one say are But looking

Frequently programmable our all So controllers not software. is example IT and those involved logic run in Kepware of digital software algorithms and a that hardware lot for run that. control

course, foot owns both somebody of IT a OT. had So IT And camps. in but owns else ThingWorx basically

the mean, the I not So or it's one kind it honest answer just sure strongly is way depends Jay is, of mix the I'm a trend other. and

been PTC Windchill our we strong historically CIOs because that's is, news relationships have customer. historical good with the Now

anyway to They've afraid in not like years not Back a we've that's because XX question of so. for we CIOs, them is from quite trend probably Windchill But my I and CIOs your honest key in mixed about a business, our selling little think away been but played dominantly companies. answer auto them. to that. we're is always bit now actually which role it's the So

a presentation with there clearly And way, presentation. material was people at Windchill let's this industry role now event, important of of were an CIO things the back he yesterday I XXX happening. to the of couple as like how think forward. a interesting laid the start going bill BMW guess By out gave I

that I'm early the helpful say a that and we ThingWorx there way that. being mean tell too company, aren't quarter. win it for like has hopeful technology projects. frequently. us. fits optimistic. to well. not based to that we're is immensely to think It's have companies But, and automotive are I I that will an of But, last there I'll they're American we credibility another transaction going kind good and evaluated switching There not you yes, in many I is been So this, tell you automotive

BMW our way this Of work process. lots opportunity through competitors we for to PTC evaluation bill But course, there's whole through following of we definitely that have material a down the project now. right to OEM And bring of is new the at into is manufacturing, to American is the which then, levels looking factory trying type of that project. automation more good and engineering have which from of environment, the

but moves of as big So no I'm a to you to deliver result here optimistic QX

Jay Vleeschhouwer

Jim. Thanks

Operator

Auty comes The next Sterling question with JPMorgan. from

may ahead. You go

Ugam Kamat

hi. Sterling. for you. Ugam Hey, guys, a on I quick question is Kamat this had Hey for actually

-- XXXX third just bookings bookings So revenue quarter, wondering over your closing what guidance. you around had about quarter bookings there? which parts for It deal leading that reiterated the is duration reiterated. change guidance talked your slip or by second is I on in other the mean but any you to million, $XX in being but you any we are seeing reached the moving

Andy Miller

because bit just our reiterated closed of QX, been of guidance. we earlier So have a end simply deal right was at little right bookings would at the the a end that end had the -- we of higher

change our there no guidance. reason So to is

Our pipeline better half back have for of now the even that. visibility we year, to the

is guidance itself at starting of same upon closed. was going that the day or first our quarter that quarter. because the of last And by sense makes you start it the we whether time it on the to this guidance subscription And day the is on today deal last based close therefore, speak to pipeline. as no So what frankly impact revenue has our already deal

our to in make revenue is renewal is because rates. The that we improvements other the point want raised the we're reason seeing guidance continued I

different countries to half we're good to on And that's progress a for and every net determined product a focused rate. We're functions. developing but get going customer plays there. done for not type do there making effort renewal now. because study. drive reorganized best-in-class in of have quarters McKinsey we We've We've many success on channel we're target of that through huge every We we're type been the

So originally progress we faster than make expected. we'd

So we that. reflect raised revenue guidance to

Jim Heppelmann

which sense year function recently a of Operations Maybe or just is maybe have ago. Field time add new proactive and put did Worldwide person to sales a we didn't ago the XX first months we organize underneath to EVP that. with to We this for customer success

Andy Miller

ago. months ago. had XX it year a We

Jim Heppelmann

put We put professional technical we services renewal put and sales. We support.

making had our progress, rates churn, we So and lesser industry one but quite best faster frankly industry is our with that Andy organization. in ambition therefore to And standards elevate now standards than did lifecycle our the rates, the renewal as against. with guided entire touch elevate an class to said, customer and of managed by or we good renewal are we and

just So good but for fiscal it's really in good beyond. go forward 'XX, news and 'XX the news, 'XX really didn't not

Andy Miller

Yes.

Ugam Kamat

Yes. was Thank Awesome you really that much. so helpful.

Jim Heppelmann

Thank you.

Operator

the question with next The from of KeyBanc. line Garg Monika comes

ahead. You may go

Jim Heppelmann

Monika. Hello,

Monika Garg

my question. Hi. Thanks for taking

confidence Thank be could around the the achieving same? booking at guidance at FQX, in would FQX bookings midpoint, XXX million-ish this Looking could about the mean talk you. maybe you

Andy Miller

range. in weren't the wouldn't confident It be if guidance we achieving our

Jim Heppelmann

Yes. look And you seasonal pattern bookings. our the I if of at think

Andy Miller

track. on Yes. right It's

Jim Heppelmann

with consistent It's pattern. seasonal the

expectation there. So, to it's reasonable out put a for us

Monika Garg

you. Thank

Operator

with next The from Matt question Baird. comes Lemenager

go may You ahead.

Jim Heppelmann

Hi, Matt.

Matt Lemenager

I on on Good the today. afternoon. have IoT the Matt Rob large for Oliver question Yes. This is business, deal volume. a

what traction volumes said business business mega broad earlier more and you being up I describe based bit strength? of similar to XX%. way question but the deals based a think you there. broad fair ThingWorx out Is up Was the -- maybe a I this strength maybe or Jim that called mega broad making in deals, quarter more little strength were lower core large deal less think kind the to that base with to regard the that a

Jim Heppelmann

Yes.

be of] just very deal [shop in a though large careful specific than specific [ph] meaning $X $X more than me booking. has of deal And vernacular mega meaning a has million more also Let because million. our as

So deals. from the the medium deals, to real as the but strength seven not deals, large figure those sized figure deals from in ThingWorx came six opposed

Andy Miller

Yes.

Jim Heppelmann

five discussed might therefore quarter, factories would a one would work XX And factories. might what's for work buy people happening smallish very again, people they few all deals five XX. of we They in they one for out XX we're buy we as lot the for trying if last buy if and like and for buy this it doing are have

it deals. terms that transactions. if And seven seven from the six bookings, figure some And follow-on how is a figure bookings It a of occasionally coming -- can and be have these six might somewhere volume quantity coming series bookings if much sometimes look over deals. But going bookings come be we're to of dollars series figure you once, it deal, to typically of deals. We a large transactions of might of then, get deals lot lot meaty from six is a of the the -- in -- from of figure and XX, in is deals. there meaty the going a from all volume at definitely, of it at the of X happened

Matt Lemenager

Got it. Thank That's helpful. you.

Operator

comes The Berenberg question Markets. next Alexander with Capital Frankiewicz from

ahead. go may You

Jim Heppelmann

Alexander. Hi,

Alexander Frankiewicz

we have just… Hi. for impact what the smaller being one Is Thanks on Americas deals I reasons or wondering the taking licensing of the was be just perpetual my average and had will Europe? that of of end question. this is on

Andy Miller

deal prior quarters. a subscription, moving forward subscription. a by many for occasional The subscription. to as was subscription look pipeline scale within all is deals we way virtually that life, large was large exception the And the or slipped end on last at the quarters quarter here the many, Every deal of large there were

with us success. So impact it way under their to them a yes, are deal buying to the kind fundamentally that no PTC subscription -- for large Again, there. of is for ensure embed customer a and

Alexander Frankiewicz

then Okay. also… Perfect. And

Andy Miller

a So risk way it's lower to buy.

Alexander Frankiewicz

Okay. previous then are confident quarter? today you in Thanks and FY'XX guidance versus just also how

Andy Miller

more half the it because We're of frankly have for we view pipeline have better the we to obviously, we half we're way -- the confident to year. rest a closer and of are done Well, done.

Jim Heppelmann

Yes.

better confident it came been and think more came last right deals to the I contribute think year to in to will track. good feel But, a lot numbers stuff said we of as have we're did us of deeper QX booking and into Andy to they Lot we we could QX. got probably if anything big of in good solid expect with the work kind so days back in we're help which feel where I earlier. more about one we because It a pipeline. We've and But, play bigger deal had on and few with quarter in in anyway, quarter. in, pleased We're we're this place it it. come landed. the

Andy Miller

used actually materially quarter. more word We Yes. the third deals in the large

Alexander Frankiewicz

Okay. so you Perfect. much. Thank

Operator

The America. with question Subramaniam from comes Shankar next you. of Bank Thank

ahead. go may You

Shankar Subramaniam

-- for the question. for taking Thanks Thanks hey, hi.

have IoT One I PLM. questions. on So, is another is two one

implementation. the examples success want like market bottleneck prevents to with prevents have on are just from understand providing a little a all Seems for First of you And bit definitely the want to thanks past had trying based you the Obviously, can adopting any issue on the on -- or in to in are digital in the how what far, IoT, demand, CIOs learning adoption IoT? dissolve but the the focused there that current terms just lot of what it? that understand transformation so are and you you've customer like use around customer faced is for and cases.

Jim Heppelmann

sure the So value I biggest making challenge is the what will you if proposition. use we say would articulate the is, case can to and and us customer the

And that and so the is, and more we've what and focused SEO I quarters narrative more the our past in over on say SCP industrial. you've I think seen this

cows connected connected not hard the or into about of talking ThingWorx talking proposition. smart Same smart, the get articulate the deal value it's go can the we case and precisely products take benefit same go to farms because precisely instead when do. what like into service. But, talk lot which can the it's are the But about Internet is, we or into that, is to a hard We about to what if connected engineering. closed we factories we anything when use Navigate

selling you you points gets that a thing the don't value So propositions the credible is I have have pie that for think and concepts you us. don't in sky proof bog down

focus back upfront. if here. are If market. But focused sweet So of I the nonetheless, we narrow industrial. just over would to I kind this the right focus IoT we learned narrowed along as of we've start think But, I anything the in continuously the spot on now business, the way we've operated

XX%, where XX% the study anyway. opportunity of All of say, is this is entire the

waste to cycles dreams adjacent industries. chasing what in focusing really that's So and trying on we're we're fewer

Andy Miller

-- a pace, But at add in been And company, markets years. you for for I problem. develop who is, industry to Shankar, is than works fourth yes, have I've multiple actually snowball because companies software my it problem. to have XX time, you've a basically software These rolling say, would analysts great at solve meeting can't a only that more this technology same got the get around thing this very normal downhill the this

are have developed. risk That more that to got You And it. getting essentially customers success and technology. with in investing it's who lowers that's about the more how

Those leader the customers the So typically market. virtually and expanding analysts quadrant. the that frankly in software are every actually the all PTC factors in fact ThingWorx put determine there that more are out has how winners industry the

I've And seen followed market for this time. playing almost like is software every long so a I've actually out

Shankar Subramaniam

you solution And a just open on it. on I with Got how that. especially PLM, dynamics, source Aras growing software this to thinking competitive Thanks customers want solution the about more understand are PLM the for heavy and your it like success terms industry is seems market. But, European some in peers PLM into seeds you from also the finding booking. bought of because selling are some

kind market? do open solutions doing solutions term, the longer of be So customers source selling a going implementation it to the into of you predominantly you see between is and software or mix are

Andy Miller

Yes.

seeds their it's Aras of HoloDesk can their sort think having of a auto-CAD. wins I lot like not every success in claim of enterprise of has the But projects how system. the little major the core of is CAD XD at bit are strange company manufacturing edges. tons that A some

system that something like one maybe starting deals department of is Aras sort in of test system or like but that. think lot a I the a win over management So mainstream to not

think I much to think doing source open that the but story. I there's they're probably don't So okay that

is in core but don't them out community core the PLM stack. responsibility don't not because and proposition And I this and think that universe. don't dangle there's to in industry, there, take think it source that I PLM their it if value vibrant development on I very help were think want customers I they would to the for it's complex think actually open actually a technology

day into that the traditional edges pockets talking deployed. end about but selling So PLM PLM they're systems may I be at a -- starter, around major that the have the companies looking of good open conversation think that way think fairly source is good of the I

big show a Aras way, when we competed did. major weren't at critical another developers is bet never point. they not business this before occasionally ecosystem at putting So they're But win competitor trying source because on there accounts we're important to it BMW, up even have of announced where that the BMW for really a And been would in They no us an competitors. BMW when some list at source open of quarters open show strategy system mission around we may to wouldn't they that community. up. in

So systems. starter, business displacing serious think I BMW, don't pockets I having that's but a pockets I'm strategy. think at great they're But in but pockets some saying like success mainstream a it's don't saying am conversation I yet they're any elsewhere,

Shankar Subramaniam

you. Thank Got it.

Operator

Thank you. closing on give the Participants please for remarks. Jim Heppelmann to stay line

Jim Heppelmann

Great. Well, thank you, Shue.

will look I growth at QX back this of it's call with progress margin us obvious combination And value. results, agree drive and for all your joining three So, When to against long-term this and I and I'd time think solid a like made strategic afternoon. our we thank everybody spending think pillars subscription shareholder substantial expansion. we've we step the is again

in our each course again of want to June addition to hope other. extend So with LiveWorx of in to XXth. on to in PTC's closing partners you us and invitation an Boston mingle employees the conference customers, you and technology join I because for opportunity I flagship join can ecosystem call

attend well at range have other good investor that able at some about event. And for host be to this we to You'll that things. you long new information extended session plan this year's planned to as as we're time going our

interested he'll you're registration details. provide the if that team reach Relations PTC So Tim please Fox to heads Investor and out

So when another days we at forward to see to not speaking event, look in at we LiveWorx you we'll next quarter. XX investor or upcoming report hope and if with about

you and good thank have evening. So a

Operator

That all concludes conference. today's for participating. you Thank

now may disconnect. You

PTC (PTC) 18 Apr 182018 Q2 Earnings call transcript