PTC - Earnings call transcript Q3 2018

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Operator

Good afternoon ladies and gentlemen. Thank you for standing by, and welcome to the PTC, 2018 Third 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. This call is being recorded. objections disconnect any this has anyone you at may time. If the now President to like would call of to Relations. Vice I Senior turn over PTC's Tim Investor Fox, ahead. go Please

Tim Fox

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

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

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

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

Jim Heppelmann

afternoon thank and us. Good for you, Thank you joining Tim. Great! everyone

achieved during the and quarter IoT in perspectives the across our I’d board, quarter performance usual, we like a segment. was significant progress on then milestones the of QX results begin review some solid a and that to the third standout As with provide with quarter.

constant Assuming revenue have high high been had in back have guidance April, our software end total exceeded software remained the FX guidance of end rates the with bookings of and revenue would recurring and our would at our guidance.

were revenue in the and end mix forecasted from a our despite end perpetual results above benefited in later more including licenses. by weighted license slightly than program our in where still total licensing announcements today's at reported, January to each call, high the we a that X, revenue higher EPS, our our booking mind in lower came driven guidance. perpetual We’ll XXXX. end revenue, detail guidance high AsiaPac, of on more perpetual As margin quarter was of the geographic services and operating Bear professional discuss subscription of of this amount that globally to offer

Overall I’ll are of grew constant established year believe differed XX% double orient growth recurring we mix year-over-year again than growth value, products convert our discussion of remain long the third, revenue was track subscription XX%, growth underlie revenue the guidance, high we the we of currency make comments bookings sixth LiveWorx. strategic in my recurring in range designed for near coming are projections end line end lower of with global Momentum on revenue our of model; around of the which were growth; subscription revenue QX, that our of growth fiscal guidance quarters we presented our a and margins. going except revenue two software three perpetual face of quarter. in revenue pleased foundation was maximize bookings range initiatives quarters and ARR within XX% This quarter. had our this metrics track digit forward. and to driving growth. even three recurring QX, of quarter performance on it software and continued here we’ve long To to was to through While summarize first consecutive our XX% previously on a once top our the the headwinds our increase million, the for all recurring growth term model expand the software XX% at we guided. the around grew the to clear Bookings solid my shareholder with to first, ARR second, These Kepware, in life and that $XXX our guidance, our model is in XX%. FX with ACV Total

growth X% Let to a in XX% constant currency. as of year-to-date me currency From period ’XX QX same the growth impacts but results and Europe’s on our Year-to-date also ’XX will strong bookings my Europe, mega deal million early $X progress where growth. growth as very mostly fiscal significantly we around last I has Also year. Americas performance discussing XX% compared planned, XX% the strong of solid front. against comments performance. had growth closed percentage. grew currency, start our year-to-date we that the X% frame by geographic growth overall with over in bookings year-to-date constant and of delivered of perspective, a bookings ’XX in in bookings instead grew XX% originally QX constant

you and more an currency team continued bookings for driving we our performance put constant China, has on sequential discussed challenges Europe we deals call, QX the for with FY on Japan currency progress in been for constant solid due APAC the due comparison earnings Japan. timing plan. called came recovery QX easier year year-to-date at year-to-date again with through QX with Taiwan a to by than to in in our performance and and in strong sequential from well driven on growth a forecast bookings Japan a sequential, our its in large to this XX% Based Korea outlook benefited third ’XX quarter the of behind growth full European we Performance bookings our As growth us. in and believe quarter. in QX, performance tracking good and Japan is to weak recovery, growth XX%

let's discussing unit to Turning is highest IoT, business now start of which performance, business. by our course our growth

that technology, some those IoT, June about add an momentum who partner clearly if event, us to LiveWorx For PTCs’s you joined then saw strong of most exposed engage will results cutting and the our customers point. the exclamation a edge you your you around QX ecosystem industry's to excited were in globe, helps of got LiveWorx IoT our

the for market estimated were IoT and expansions by record rate. XX% driven these bookings in half in our growth ThingWorx quarter well of PLM expansions. grew figure again bookings year-over-year accounted by a basically bookings with the exceeded the Customer number of once over Our neck-to-neck deals bookings. growth quarter the six

to you subscription growth, from to If year-over-year XX% mega model happen. starting in of growth estimated figure accelerated rate. exclude Recurring is IoT benefit eight QX, market growth and the QX, the above revenue year-to-date that’s the software then XXXX, sequential XX% maturing X% deal reflecting growth IoT our now growth compounding XX% well bookings posting again

recall factory a markets. us. started, win that Rockwell cases, suite we SCO In and the of in geographies ample IT Though growing combination On this significantly Connected still a automation really of vertical the getting to Blake is and During manufacturing. increase and our which new $XXX begin sell XX%. across both Rockwell an major positioned with PTC I'll software IIoT deals we with trend markets. saw north we're credibility during into the will will we SCO Chairman process with connected new QX join the will and move automation PTC’s secular OT CEO respective you our market quarter. quarter major just and of a will Smart Through partnership smart Operations use partnership uniquely of go-to-market ThingWorx, partnership, closed the Kepware PTC and we a this is Rockwell both and or of will Vuforia, combined technologies addresses may invest $Xbillion month secured top and really Board million will convergence, strength in Moret, the and respective with our which operations. past market capacity Automation align only Directors. our discrete PTC company's companies been for needle in see and and in This evidence this expansion that it's this

in the of for Scandinavian new major examples next retail engagements. semiconductors expansion a a tech SCP or win in include number of generation meaningful IoT win In automotive and Micron offerings hospitality a of Connected for signed we market leading expansions Hitachi; NCR a industry. at closed at in win the the for a automotive Product Technologies, high Some and and new OEM. Smart at a example wins

a of for us industrial too into I technology at channel With telecom we their represents of nice brings LiveWorx, studio and landed massive telecom the witnessed into providers. has what incredible at nearing automation. within landscape. business, our ThingWorx use point the across to am of Ericsson industrial with OEM relationship sale go-to-market are augmented many some reality, a NCR accelerator expanded SCP deal represents their their giant customers, major addresses and the our Medtronic Automation sure In which retail lastly some cases embedding device as an space, Rockwell equipment variety a platform. in ways, a who's Ericsson, medical with In IoT major IoT presence, Vuforia that global you we channel the PTC

but AR record triple we Our and number, in more it XX% specifically AR almost bookings within the year draw almost AR, quarter, the ago up quarter sequentially. is IoT we the business reported into achieved

Vuforia this XX,XXX market, or for factory accelerating instructions, and and service it's are demonstrations. still operator test instructions who product has in technology have we virtual enterprises into early driving put an now pace maintenance over and While at been have this production purchased

accelerate. AR. time. seeing we’ll a [inaudible] over we that then have adoption position We material levels are in and PTC’s strong growth-rate are sky seeing performance commercial we're very confident to increasingly Interest and leadership another become I'm high

Mixed a LifeWorx, On medical pleased joint in momentum opportunities connect continued to we QX were example strategic Cannon mentioned than assets, Microsoft with globally. uptimes ThingWorx across Alecta, joint the customer beyond continue of deepen course on new maximize the more front Reality. deals diagnostics will company, and HoloLens our and at providing and our into with Microsoft’s collaboration which and implement at And of partnership One with our is the active see collaboration our and We of partnership service, team’s XXX around are IoT was there or to product a IoT Azure collaboration deal a the for connected VR thousands Microsoft. calls who there's what pipeline closed Azur Microsoft partnership ThingWorx win dynamics to and globe. quarter happening with performance visibility great AR of exciting for for MR lot as the in we platform the clinicians front

excited We partnership begin strategic with are very ramping our Rockwell Automation. to

on a quarters. and progress is wide indicator QX services As was and a product adoption branding have across work kicked you technologies summarize range imagine, To accelerating many enablement, and activities updates with We Rockwell host planning vertical our use of sales to account over off that another amongst markets, strong the geographies you other targeting, can providing of streams. coming look around of these integration on AR, forward cases. and IoT

turn to growth as partners the for now market, channel, continues CAD by as a paced rates and strengthens position these consecutive well year Year-to-date product strong. from bookings of well quarters exciting the to out growth evidenced Our our benefit go-to-market CAD balance all very now initiative, growing growth of our offering. solutions reseller bookings digit ecosystem our coming me growth, PTC’s of further strong optimization so double business. XX market outlook let leadership of double our digit as remains in

that which is because manufacturing, other On back integrated we front, today the sometimes X no called capabilities advantage topology easily has additive March that stand Others returned tool, released We which alone CAD XD geometry CAD Creo. into optimization This such effectively is created runs at and within a can’t by that have exporting tool creates the product printing the market CAD the environment. the new major a date environment, outside fully LiveWorx broken the that optimize tool out CAD in in would do competitive data then Creo chain software for the CAD was as highlighted but be can breakthrough optimization. to don't problem. of CAD problem some

ANSYS we strategic LiveWorx. development at partnership announced Now complementing our with CAD, an in exciting product new internal

We technology will integrated simulation be LiveWorx, was demonstration biggest and fully position real simulation the plan and inside solution. to This amazing of breadth come. with of this Creo’s one embedded of market an embedding launch combination the create Creo ANSYS’s CAD Discovery breakthrough called Discovery Creo announcement suite year, time this Live We're will later time expand a first overtime competitive we real simulation for and highlights Creo. Life to integrate planning simulation into years ANSYS the full and initial to

for tuned over relationship stay well. details quarters So more the ANSYS on as coming

rates a Turning to decline ahead Year-to-date low growth are of very QX deals, the with timing pipeline PLM PLM, due team growth tracking the bookings a year-over-year solid following the and in QX market solid. delivered in sequential to double large QX is the PLM of digit. just

above market. deliver this year a business growth or the at expect to We continue full to

the now performance very in perpetual initiative where despite trends recurring a headwinds, up be We you globe and high but globally, but mix subscription transition little as in targets still within still We're a our value, model. very due remain June. Kepware. licenses, subscription to delivered we have a ACB drive our of strong points me AsiaPac we subscription QX, provided our of X, top momentum revenue we’ll pleased with X,XXX in level we our to revenue QX our around except term ending transition to for This forecasted. licensing guidance, is subscription in today adaption we from XXXX resulted which higher range professional sell long guidance than basis Let below subscription across that and software our was Subscription confidence XXXX. announced shareholder strong to January turn and the second to FX perpetual

our guidance, even is due operating third accounting Let our despite level which our me margins. mix primarily mix, margin initiative high further to end value, perpetual increase headwinds. higher the wrap-up by QX was within when to discussing was and my drive our operating FX above comments shareholder range top our license to In guidance for of

position evidenced by subscriptions model and the financial AR the the IoT who cost PTC that, software on the disciplined that performance points to our multiple of rapidly We by ’XX, business and to then maturing subscription progress management. I'll over again beyond, expect in while few our model. are track of compounding core you. accelerating fiscal on ago premier we business, like the to made one I'd the firmly by margin a our turn long our margin few high will review the to over With weeks companies expansion greater closing, transitioned markets for in to as shared ‘XX LiveWorx. of exciting our commitment XXX at of expansion achieve reiterate basis in than We're driven portfolio years focused in leadership past fiscal In years, transform of plan and growth We've the great range the the Andy PTC world. highlights call benefit with into and the

Andy Miller

however and bookings our Japan’s QX Please million and note have high X% end software guidance and of QX just QX million range. of been grown presented any forecast pleased that constant end up you due Jim representing revenue non-GAAP Total adjust end to of the will million you closed if and revenue. recurring services above year, growth from over headed XX% constant that overall year-over-year. million $XXX relatively results in operating were FX was deal bookings in for XX%. end of easy but our high despite guidance. would quarter discussing I'll XX% margin we year-over-year that if mega $X Offsetting result. Results ‘XX perpetual was guidance. revenue with guidance high Total forecasted I are $X the of of QX the the currency have bookings remind at the everyone. instead upside under EPS Thanks for our performance early compare afternoon note revenue last than FX, an ‘XX guidance lower be than were currency Year-to-date adjusted $X currency benefited $XXX Also FX constant $X the at that million our our of ‘XX. a good high of million professional headwind, higher that near was revenue. this and

timing QX revenue increased was revenue grew Software point our deferred which X% X the were increase XX% grew on mix. XX%. of end, year-over-year year. X,XXX quarter was X software our up revenue, Recurring to versus Billed XX% billings by basis revenue million. this July despite billed plus recurring $XX total a or unbilled, Approximately subscription $XXX software last was recurring. XX revenue revenue of in Total differed July year and about was XX% million due Subscription up June year this XX%.

apples-to-apples basis, billed to billion. $X ARR XX%. increased grew So on an XX% deferred almost have year-over-year would

high-end guidance that operating of high the end impact traction the offset Continuing the ACD play a guidance. basis quarter. support the substantial our Our services their and in a to higher OpEx with of and within our guidance. $X.XX new benefit guidance. over will $X.XX resulting XX to revenue negative believe customers XX% of FX We was than estimate our continues of XX%. lower range, was perpetual in of drive base XX forecasted $XXX lower by more is that P&L, and opportunity well to our our million converting support subscription revenue together with and in the upside of And high conversions to $X.XX contracts the gain uplift $X.XX program tax channel, from of continues customer of at conversion an progress the EPS conversion towards years. many QX was end We out margin above within XX program direct than the points above our rate

of Moving ‘XX million were program from repurchasing balance and QX to $XXX $XX we investments down and XXX the sheet, million the million of ASR stock. cash completed

Now turning the guidance.

our FX adjusting reflect current rates. are guidance We to

range reduction X% of growth a to expect January million, a to year-over-year impact in year, until software of This XX% the We XXXX. the for to where closed of expect bookings from early. We million $XXX for XX% now the or adjusting perpetual expected the when due $X of XX% still $XXX million currency. represents negative higher $X million $X at proportion X, to that megadeal we mix reflecting of bookings subscription million offer XX% from that the full APAC, overall midpoint

We exit XX% the and in to XX% expect mix achieve around FY target year to ‘XX. makes our

remarks, provided Jim are As . shift at we his this we confident achieving mix not term modest long impact mentioned targets prepared that in the does LiveWorx

FX expect revenue headwinds to higher of $X ‘XX revenue, both offset services professional guidance, decrease a perpetual partially previous million total $X.XXX revenue. in million a decrease our license $X.XXX and We of primarily fiscal midpoint $XX billion by the driven billion, from of by at

revenue XX%, exceed of business revenue are ‘XX expect offset partially now $X.XX acceleration of last subscription XXX margin by multiple approximately by ‘XX year. approximately benefit billion recurring subscription an for XX% basis to maturing by higher rapid at fiscal million midpoint guidance, XX%, billion, XX% points above years the in about grow increase FX. revenue, expected driven of year. software revenue revenue is previous the $X.XXX model growth realized. revenue subscription the to driven points to by to beginning basis perpetual our as software our mix raising of of with compounding operating a XX% in X% total than higher total We software despite software to and is of $X guidance expected XX% We Fiscal represents XXX to is recurring growth This

up With full which $X.XX of over a X% approximately guidance, to expect increase $X.XX, the to previous X% tax of a year, the XX%. our an the for is we midpoint rate of EPS growth at $X.XX

in of modeling guidance. section in assist We takes our guidance document an puts remarks you EPS from bridge the and have our provided the to prepared prior

of flow of free XX% expect million expected We payments million, free cash million, at to midpoint. October to $X to to million ‘XX be $XXX flow our $XXX fiscal $XXX related of to the cash cash million year-over-year continue which restructuring. Adjusted $XXX XXXX growth excludes is

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

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

Operator

from And Instructions]. our Steve Securities. Wedbush question first [Operator Koenig comes you with Thank

Jim Heppelmann

Steve. Hello

Andy Miller

Hi Steve.

Steve Koenig

very Thanks Hi everyone. question. my much for taking

you those and environment? of anything the one, grew good if software of could guys, see, only total I the if from a bit to guys – IoT in recurring impacts position performance. kind demand QX sign of you expectations any global revenue impacting Let's ask I revenue, around kind that have are decelerated to little going just a nicely. I'm trade You software the ask nice see coming pretty frictions up. And The

and Just can happening parse bit IoT a some little that perpetuals with swing there? in out there was you what’s

Andy Miller

subscription XXXX year ago. a ago. $X basis We helped ago year that went me had revenue Basically perpetual to a in from let one. which million up answer Yeah, a me points the mix year large, almost the IoT let order a

it’s driven XX%. by grew revenue IoT subscription So mix. all The recurring software

with had ago. the XX% that perpetual I a fact the year or think were big revenue we XX% a number we

Jim Heppelmann

on the was I overall mean and here had solid the a U.S. bookings in and Yeah quarter friction, strong trade it question we about

now right moment on, we you eye anything. we So that, but as I seen an ask the should have think haven’t question, any keep this but I know we myself something think of it’s don't I evidence same of

Operator

Thank you.

from Our Kalia Saket comes Capital. Barclays next with question

Jim Heppelmann

Saket. Hello

Saket Kalia

question Hey Thanks taking my here. Jim, guys. hey for Andy, hey

saw of is You quarter’s I that know where maybe in in you the mix. for Jim, course norm; perpetual we this more think strong APAC performance

discontinuing that just region is starting region you perpetual perhaps in and worldwide that way how talk culturally sell to sales also X? well think about you subscription in where January accepting Can is X. after the force are trained January We a

Jim Heppelmann

was Well, I regions different been time to look China, this subscription think do steal the you way really business at at you latter been and go of is our to deeper past want? QX has if were some trend of a in a the of this two-thirds look the to at ago over ask we've Chinese business of think our is, long at Japan I that's about on a quite APAC, if and subscription China. the But you bit into if little years. what the if year was Saket about a mostly, subscription, strongly has software know actually want look so QX And what we you Well, level, third positive. our for learned they customers

not subscription to China worried So, and with answer models the have how so and in really been companies look other about certain is cultural successful I think absolutely see we're a around extent we and support.

You a got model. know think good business we we've

We are year. in amazing way the last made progress two-thirds and the there of

to know we just do. planning we need that's and You what the finish to job are

Andy Miller

now. said for actually two-thirds the want Saket, being one With the what subscription thing add norm there us is to to buy is is you norm And I perpetual. actually subscription,

the is a of drives number So much frankly what from deals one of percent. modest shift is, in that is that geos, the it a million perpetual, frame that got just over large fact – highly a we perspective. couple offer even dollars Simply mix Pretty sensitive. is we you've that mix subscription to still just,

Jim Heppelmann

a upside perpetual. in and Right quarter. being know and bookings we Frankly you lot had quarter of up a the bookings a had China we we strong ended strong

we're customers know keep much, because a confident that’s doesn't much you actually our we're software, mean pretty and the it soon buying choice because will trend. and not there won’t actually into that So reading this, be pretty

Operator

you. Thank

with Our question comes ISI. next Ken from Talanian Evercore

Jim Heppelmann

Ken. Hello

Andy Miller

Ken. Hi

Ken Talanian

the in attribute pre-buying just you Hello! a present on might taking Thanks Do of year? any the for headwind APAC Saket‘s strength follow perpetual question. to to calendar next question. up that Actually

Andy Miller

for an a yet. a Western and We good have end obviously Europe. assumption running the and of experience be in program have and we America fourth now quarter we Not yet, little not think there'll life even and got bit of in that we

bigger So it determine the how in little think piece will we quarter. a gives the us happen more quarter, much the is in fourth first bit to to be data going but

you of thing I’d that though, you say Europe size other of that just think and is even they the compared business. is much buy, a not to smaller The drive that it's Americas know business big that behaviorally so perpetual might Western would

Jim Heppelmann

in announce mind, until Yeah, and didn’t keep of we end the perpetual sales today.

So unless understand to would coming. this, conversations in that's like reason were those they listening on customers investor have no really

factor. the So I was that think don't

and that’s happened. I a strong think close the deal some had what there sales guys strong that preference to just was where deals the customer had a preference and our

Operator

Thank you.

Monika question Garg from KeyBanc. comes next with Our

Jim Heppelmann

Hello Monika.

Monika Garg

I the taking a have Hi. range. my bookings for on Thanks guidance question question.

know needs $XX look range been end You range the $XXX million, high last million. end bookings about year I or looking quarter, guidance $XXX has million is at between QX, if low But million last $X larger range? to what million. Thanks. towards the $XX to range and a happen leading more bookings of somewhere end anything high to come to tighter, Is kind of the for

Andy Miller

you So, for realize guide quarter first know us. got a XX% higher off than about that to is the typical you

deals should be variability. to big we there is sense and in our a looked the where and more lot be makes historically performance it more tends bigger So at frankly a fourth there quarter, quarter it back

The up for The million but we our of of ended don’t know the it forecasts. ended $XX amount year above know I year I know think year guidance, we example internal last above we over well before guidance. were the was exact example $XX the our for guidance. You million high before the I end high the of end

quarter guidance it’s them can more there's can in than bigger timing have appropriate more and and move number quarter, especially fourth we to the a big to range because big in a the fourth lot in So deal think us quarters. of a for our other deals be subject

Operator

Thank Vleeschhouwer you. from question next Securities. our And Griffin Jay with comes

Jay Vleeschhouwer

Hi, good evening. Hello. Thanks.

Jim Heppelmann

we Yeah, here. Jay. Hi are

question. We’re for your waiting

Jay Vleeschhouwer

you Sorry. This question for Jim. is

assembled is, The go history technology You’ve ways is etcetera which a have how permeating That and company that, are in you partnerships to know so but you year you of back say of these you, and question the have managing quite Matt, and in last partnerships. over cultivating I business terms with of or the top pretty good in the that? that it's unprecedented at company Barry, I Andy, there are managing set company, in terms of you just or how terms a you, of your were kind or more Andy, field, engagements mix and both broader a services scope number the you expectations, question on be should and Is then anything mostly there in of the that below in corporate of we And or is shorter timing, term of technology, pointed relationships aware out. the deeply you currency? going that’s revenue of in for question. so it business

Andy Miller

makes kind have of to it so a to an demand some most that’s really helps engagement try driver. doing and drive as because as the big primarily give amount only make frankly sure we really and try the platform. we valuable part to engagements, small them just and of – of And currency, we to Actually to partner can, strong of them much are our a ecosystem the continue timing with them of continue them we

Jim Heppelmann

you first could decline our accurately possible. say a coming mean we our back. partnerships. to said, kind of service we That unprecedented I and I that off But in to guide loss, think strategy because I not that know, think with revenue It is doesn't doing something forecast as back your washes grow want do if that are as much it’s question, to business.

so what of You the the partnerships with of I getting add ecosystem, we digit it’s in unprecedented done software looked the are MCR sort you But double and have Jay. and tracked and margins the Erickson what back things much think or ‘hey, profit, and time the Microsoft want operating we and rates you to and said, whether do we best we our for we've companies to one and like and company Rockwell do the and know I and and of ANSYS might unprecedented subscription, forth. need with to know was was all but growth world growth be SIs

the So very are important. we think partnerships

and and an DiBona, Microsoft thing me Microsoft Rockwell job you we've a job one and to little to is your we our this term reporting head that taken and make already special long organization partnerships Now these executives, Tony a Rockwell and with said, together done his executive of is and is that organization put successful.’ ‘Tony is who's have and to So successful. make

that but right job of do day in sales people because project. and are But of point I amount so it's their ANSYS, and he's project with going really work, support pretty we unprecedented a forth something the things do managing to product doing to enablement so it’s that comes that these is We’ll bit terms we and probably support the bit yet, are sure and of talented to and this. just a a these it and math optimistic think an over lay when have at make partnerships. so so partnerships very don’t your I'm function, Now and executive an will to make but to want forth, it managing mostly different we we because work like revenue this are we you know overly try up dedicated is Tony to still R&D do roll market to that's and who so the doing have premature like a

Andy Miller

Tony today in whole dedicated we all I exects, are really a there streams driving that was accelerate been there's can program, the specific Rockwell around a combined for thing product there fact of one – have companies Rockwell, launching these senior integration, sales week this his so summit launching at in and is success folks hope enablement, here, and The there's targeting, there's number are streams now account management very and here. streams program XX to addition the work a of work work we set team, and a right to including would entire both in basically fact add and of

Operator

Thank you.

from Rob Our comes Oliver Baird. next question with

Jim Heppelmann

Rob. Hello

Rob Oliver

you talk channel I how kind potential on on taking just of Thanks relationships. we partnership kind guys. know connected for Obviously of Thanks where bit about little guys. there's my a view about and are SEP two the question are you for to want of question Jim, potential listed how Hi, more that you bit those the connected you. were channels of and Hi operations Rockwell little get three a of guys. lot reference the evolution enthusiasm in then on a products, But smart you? customers smart color perhaps side. a

Jim Heppelmann

because take it simplify one Yeah, is to these to that’s cash do monitor know, take put happens trouble things point deliver if insightful sale when a to you it. in let's is just they we the want the they if customer customer you call works is actually very them their NCR site Rob and in cases because channel, a have that determining question, for like want that what product actually registers sometimes – we many then when logos example, to thing of and a of and

to So at you vendors store frankly we But now the partner. want the connect they customer. set other are ability now services go-to-market they assets that like offer of and looking and know, go say so into point than from actually a to a ourselves, start they

equivalent in the NCR like of it factories that Sort is in is stores. of doing and Rockwell doing

that. up technology, they and for end up to us just a royalty customer technology, So know based actually services on customers the not SCP for I then many paying hire the but actually delivering think their using end you

thought successful, a have. mean is customers care as long good to question. an a either are as be it’s are they way. So I whether interesting going it's great to it partners I don't

don't by is though the a central bring some be in cloud. with don't connected a to don’t cloud, to we is what for private we and it’s we am cloud want software. that's case to is with competing a smart cloud source. to and saying. to That public definition either SCP be it sees and Microsoft, infrastructure, we in end use we it’s competitive. I breakthrough going private be world know cloud ‘Okay, competition. or Because Microsoft, want for really an want Microsoft sell named source Microsoft we’ll public collect that you products that going that you,’ I partner be who a true data us cloud a the a proposal all up product a has there’s back want thing just want a the customer its If because cloud in no have front and over If then think because to to know unnecessary we have unhealthy you as the with of you always have a the partnership to putting

that So with Microsoft is really, the it very this working important that partnership I'm did, some we pleased quarter. good. like to performance feels is with I wanted feels we the that think so It fact past in we had evidence see pretty really and and good partnership in

Andy Miller

we larger actually that deals XX bit than deal the ourselves. our a they're is closed, typically we thing little first other that The closed

– a larger. call is XX is So to but it there they so number a that’s small our I are definitely actually don’t trend, interesting, want

Operator

Thank you.

comes Our Morgan. Sterling from next JP with Auty question

Jim Heppelmann

Hello Sterling.

Sterling Auty

Hey, thanks guys.

is on guess drill in on strength the second the guidance. Kind into that's of strong what it factors in been had the the not the So in and guidance second half you for be that if to half, and Asia the commentary of factored of I the kind would originally has want I from the based might right which talk Well imply it? that for guide. read maybe as curious as another region the region the

Jim Heppelmann

and a million dollars $XXX you Well few on are talking $XXX about million million midpoint.

have to our we number. to get paths So final multiple when we –

a outcomes look quarter the paths, actually to fourth we down perpetual took a most likely those where basically As as by I more it’s weighted little as little far revenue. more we bit APAC the of guide mix. X% we bit at mean our have

a two make call another. line is way or bottom that’s one deals little nice is, So are is we a or to forecast. We the is the has – than performing and the we GEOs hitting that’s the year, call – APAC one a no recovery, made. nice for just had plan, a expected. There's looking stronger America AMEA that QX Japan’s our had to plan

nothing So read to there into that. is

Operator

Goldman Gabriela next comes Thank you, our Sachs. Borges from with question

Gabriela Borges

base since understanding Discovery base, PTCs CAD feedback just and on announcement your Discovery then good a if within the Thanks interested Life maybe I’m could. have curious, the the for would what sense Live, you percentage buying what Great, taking afternoon. do CAD Andy composition of maybe one I And the of types on based for through gotten Jim, the question. you've of in the for partnership? be or customers that clarification

in this that I think the and deals you in year. large there of couple mentioned a PLM times XQ pipeline are of for XQ

how anything happening vertical you. relative a curious deals Just If standpoint? there to the volume Thank there is interesting comprise from loss of large Jim?

Jim Heppelmann

Okay, on question I’ll Discovery take first the Life.

Life Discovery So think word being simplify of the a in of document. processing benefit for everybody, to a just things like checker spell

and text to writing spell check the stop write of mistakes. a would find and You all you and you’d lot used you’ll then

and spell more text. the to correcting that time You’ll fix look you all mistake writing And in misspelling check a now like showing word Microsoft like already go is all word, new running doesn't make as me its then a or typing Word capitalization it's and you're them to itself. you and back a that if

to now if find fix of and to it bunch try problems, design, design, We a So bring designing. and whole kind design, used all go take simulate metaphor and stop over you them to designing of then CAD. that to back will go

wouldn't shoulder you want question. to I of its design are want watching of the in that especially user and Word. a change who checker? spell what the capability. it, phone ones you your your for use this that's long every Anybody change literally that have geometry checker Microsoft But make, probably no a I over spell single everybody and answering would that as So think wants is and on benefit way creating it the that are from you tells every Now say a implications call here

don't we be its technology very CAD I how out amazing far up kind how you, will thing would of but figure and will our end base. into if of should a that to and go, with fast have would penetration high this happen. we I surprised Now the know we penetration didn’t tell

Andy Miller

looks normal in And were your closed back had The we had deals, QX, had quarter more average the had including larger good fourth big a deals pipeline the we the like a before. and range, quarter size look it in at and we in third in other large we is second the quarter the our than question, as lots we quarters. than lot typically closed quarter with so rates so little frankly lot a a large more, the more we in pipeline lot of obviously QX

company. So it in the QX pipeline looks like software a

Operator

Thank you.

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

Jim Heppelmann

Hello Matt.

Matt Hedberg

what a deals new. like. lot curious, from are these XXX on. deals you of give I customers we're bit guys, that the may those I'm functionality look or at with were of a wanted mention most questions. you Azur, have said of Analyst are wondering base Day results. update working using that question us you is circle your on are are know an you – thanks you little for know if Hi Jim within I'm these added quite net to on could happy back I the about talking on just there think prior I guys a

what get Just to like? customer profile for better a looks that understanding trying

Jim Heppelmann

could second, actually found be to the on, because here if and probably a me them. names. try let list give page. Hang characterize Yeah, you see me I I tell I have to careful, I a okay I can’t But have the

some just its a industrial let's not medical of types companies. device are I them companies. diversified customers, let me of a and our many customers see are. which know lots the first call at electronics couple of jut you say, list, So see of companies. looking I few see four, three different I current

– and don't half I know the know. list the you So frankly names on

or are prove our customers, would their but So name. customers not I not are doesn’t they that they significant recognize

think just I kind do mixture. it's a of So

but them or we're Microsoft know we being neither may maybe of also found already successful us being we're to perhaps Microsoft knows You and just them that us. know, introduced customers one prospects them we successful them knows or new working pursuing

a So it's good combination I think – it's of thing. which a a good kind is

Operator

Thank you.

Cowen from comes & with Matthew question Broome Company. next Our

Matthew Broome

during was Navigate quarter? the for How Thanks. demands

Jim Heppelmann

highest Strong quarter historically. one quarter strong but Navigate, for Navigate. ones Navigate, for quarter actually PLM, for means a of a Strong the it was strong usually quarter for

Andy Miller

don’t was… it was record, a think I but it

Jim Heppelmann

Not a record, but close. it was very

Operator

Thank you.

Munda question from Capital Gal Market. with Berenberg next Our comes

Jim Heppelmann

Hello Gal.

Gal Munda

on question guys. had Hey the a PTC I just Rockwell and partnerships.

overlap You overlap time opportunity show together and your talk customer when IoT guys proportionally have of to maybe now. the seeing what to had assets programs customers that if at you've that, go-to-market some with out a and look offering already well. said to them much asses go much that – there’s as about the off how to them Lot potential then of How some are and the if you where can kind kicked you with is market you guys bit space. maybe from base that they managed the

Jim Heppelmann

an that's interesting question. yeah, Okay

integration during field say positive. thesis the of with first those the process did me customers to Let tests live we do products just and did together some the we real whole came and actually very back person coding that customers test

make force, to several their because sales some a figure major that do we think trying has but quota. of and how thousand XXXX have XX,XXX to people I larger, a let's campaigns running, in So which actually roughly carry say sales not customers are we Rockwell out much

to to a train under a overlap to but thirds channel. market, So third lap, lap. overlap and about coming two such But work and massive enable a the it’s under about question say that’s your takes it channel to us I’d

oil lot For Rockwell in do typical, presence material. pharmaceutical. these gas, in strong almost PTC in are and are both does know example, These automotive. – Rockwell pharmaceutical. beverage, you and quite we now and a mining has nothing does food chemicals, not

American and that PTC a Rockwell in out relative incredible weak automotive strength for North However that’s it spot. turns has

will accounts a but lot Automation and Rockwell is Rockwell there's of will be mixed, bring we I a I accounts. lot in will into kind into new a new PTC So of think think bring to happen precise turn definitely of Automation what

think there the the is combined but us I suite, could of immediate selling So how leverage. each of then

you convergence very I Rockwell sell in hardware by example? automation just But other our PTC at Perhaps. suite, interesting. could IT, a sell know kept You be that that selling for PTC itself think Could and respective into once cross Perhaps. products PLM very, know introduced level if suite? the we of and it could industrial CAD OT have more account our we

Operator

Thank you.

Subramanian comes America Merrill Our Bank of with question Lynch. next from Shankar

Jim Heppelmann

Shankar. Hello,

Shankar Subramanian

a ask question with next how three Hi I follow-up, side. guys, and have to color you deals OEMs? question. some how or thanks add Can it coming any as maybe a BMW you is me the six on partnerships large conversation for see the progressing, letting deal, automotive on the months? is Could up the other the in Thanks.

Jim Heppelmann

large very that’s Yeah going well. therefore and phases, in well, relatively the are project first of it's all, BMW still dealer we a the early but very

weeks BMW we and fact couple had business meeting. it very was contingent a a In very, of of executives positive the last in

going project. you think things on So are that know well I

BMW say need highly in how you that between I'm us, of other first just helping BMW then sure know It's and do me that? valuable with know. batteries, we the XX that know specific What needs would Now you and a customer would So if let figure build its forth? it system. project we're and our would automotive exactly terms as way out a configured that you special every good Well, companies. a we're build order BMW doing in that's project. going other one not management material SCP, production these is take that how project of to build and SCP to configurator We're be one, so you

and I of right I a number companies in we’re automotive in talked the American talking said, BMW's some projects that This in a We're tell us. interested. the what automotive we suppliers. these on to doing SCO. North is calls. Now now, we particularly an have about or Rockwell IoT that factories the on can mention I Toyota, but is lot helping Scandinavian stuff previously going of business call there's you project.

So factory. right that IoT in there's of the lots the characterize these appears into the stuff would be happening I biggest to industry. it now automotive entry point in accounts

Operator

you. Thank

Sterling of Our Auty JP next question comes Morgan. from

Jim Heppelmann

Hello Sterling.

Andy Miller

Welcome back. Sterling?

Sterling Auty

Yep, was I sorry that. on back. I mute. am about

that the So perpetual on the on of Kepware is you're know up elimination XX% mix, could subscription? follow to of is commentary of is with only that’s mix just target of fiscal XXXX through Kepware the mix Or that of you subscription that one of If still expecting XX% ‘XX XX% the question perpetual probably on does booking? that quarters kind X. on blow and three for north the January hit XX% available four really terms suggest in of something out you that you're

Andy Miller

No, the Kepware near is not bookings. XX% of anywhere

we’ll we update you today ourselves our we can. XX% going as as but as try good Okay, is are and mix we going a to drive to high see above model for subscription that.

Jim Heppelmann

Yeah, yet. think we're this point to maybe we'll don't having number, at surpass bolt certainly it, through today, – we We you I down let's road just we’ve hope number revisit not what's some, the know that say can I it. right but but term think next ready when announced to want guidance we had the at use year you know look there and about the that’s out the

Andy Miller

Yeah.

Operator

question-and-answer Thank Mr. you. turn That session I'll Heppelmann. concludes over the call to back the

Jim Heppelmann

to who appreciate operator. an that. here, Thanks you of I the us hour with Thank you, Okay, great. on spent phone all

QX margin long you You at strategic subscription strong value, growth will shareholder term drive we it's that we progress feel a that our that so hope know you our we're the look again about obvious and expansion. three know we're lot our you do against and I think of good if too. know that goals, a you making and I step good progress back and know once making results,

you good thank a and evening. So have Bye-bye.

Operator

conference. joining Thank today's you for

this may at You time. disconnect

PTC (PTC) 18 Jul 182018 Q3 Earnings call transcript