PTC - Earnings call transcript Q1 2020

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Operator

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the PTC 2020 First Quarter Conference Call. [Operator Instructions]

I would now like to turn the call over to Tim Fox, PTC's Senior Vice President of Investor Relations. Please go ahead.

Tim Fox

Sheila. you, Thank and to everyone for PTC's joining Good our thank fiscal call discuss QX conference afternoon you 'XX results.

today Chief On and call are Chief Heppelmann, the Executive Kristian Talvitie, Financial Officer. Jim Officer;

including statements. to materially started, cause please such actual that implied These today's forward-looking financial Before we from uncertainties or statements are and by note future subject get regarding statements could differ those and comments expressed results that include to statements, risks forward-looking factors guidance. involve

Additional factors our filings report quarterly these information the on with Form on and PTC's concerning in contained is XX-K SEC, XX-Q. annual including reports Form

non-GAAP reminder, we'll reconciliation between measures and a our X-K. non-GAAP Discussion release and non-GAAP operating and GAAP of included Form are related financial press financial our measures operating earnings metrics As items in financial referring today's and these our call. be a during and measures to from excluded

to unless be growth in Lastly, will currency constant rates references noted. otherwise

call let me And to over turn with that the Jim.

Jim Heppelmann

afternoon Good you and ranges. solid I'm to us everyone thank Tim. attractive deliver targets is our financial which Thanks, top key our grew our metric XX% us. fiscal right in our long-term performance puts against 'XX share QX track ARR for pleased line to that joining on and QX.

detail year. currency favorable EPS guidance for performance, visibility and flow into our also we will are of guidance QX our fiscal adjusted raising We're later year and call, Kristian in the cash raising ARR the As on our the fiscal free based 'XX tailwinds. the revenue, balance

mid-teens, one to model hard 'XX really as profitability, our convert truly of the revenue a software XX%. fiscal work companies. rate to to our now EPS world's subscription to is public starting show, are emerging The PTC of the done premier the past benefits of growth increase expand in growth because in and we've to years growth the our and midpoint At we're growth above expecting guidance, approaching all the XX% ARR

hospitality Before PTC's the the entertainment, models. details, like that to technologies, companies this by across helping embracing I'd trends observations to facing the industrial and position share digital new in industrial unique terms rapid traditional during now Similar digging world. of are some industries industry been other change of thrive into have from in digital that disrupted challenges or period exploring about broader are from entrants and value like business new transportation competitors technologies new chains, customers

their and that's to across Digital simultaneously while transformation optimizing enabling sales has and service market, processes. services a industrial become engineering, the their differentiate sweeping wave manufacturing, products companies better

the or significant PTC, leverage product AI transformation be digital PLM, because initiatives. align has operational a high As here. from and looks only in AI suite a CAD, with with drive our to their else thread very data and things ambitions. many our of Nobody the they it's technology. customers, we host AI design, to PTC productivity resonate AR assets you chain, help I a customers day, really exciting leading Every their digital their pursue tell and I customers has us company like across driven factories AR unique opportunity the implement to in are out meetings product to helping and who do to to the and to improvements capabilities, insight and a IoT there through PTC Solutions can our of field to products ability gain their worker priority that technology through with front and IoT, customer time value their like create or

the economic traditional correlated trends. now one momentum, with business much should PMI note our like less that PTC index Given take forward-looking performance and measures are

much impacted recession dynamics of great the streams secular PMI. large I cyclical model revenue. are decoupling fluctuations then growing from by to This with less suggests degree earlier, a our measures As in we that like business our perpetual all traditional coupled that learned driven a XXXX, subscription-based economic business of license is revenue described recurring have

strong are against growth backdrop We the recent lackluster of some most numbers ARR guiding memory. the the PMI in of

us Of of our but remain forward. going confidence time mindful we measures, This negative these sentiment decoupling in been some sustainable now. drive growth around to ability course, external has this for more gives even

once growth includes solutions SaaS. market continuation for our our rates, Turning growth AR now and trend ThingWorx into the of high and quarter. Vuforia service outpaced growth in accelerated reality their begin thanks manufacturing to environments. introducing highlights now ARR IoT, I'll and AR quarter-over-quarter augmented some the our business a of Onshape again with that solutions customers IoT to

healthy QX ago. more about logo a than the shifting versus represented accelerating production of quarter, doubled and The in XX% by AR activity, at IoT year primarily addition expansion In bookings, from to deals an number of new bookings six-figure the customer pilots driven pace.

ARR lens, impressive. across ARR customer an Relative cohorts grew through and with of viewed to the are XXXK than AR over trends by year last greater [ph]. of customers QX When IoT our number XX%

In Thermo development division Fisher data the offer customers a in and to Thermo predictive analysis ThingWorx test to One leveraging Thermo competitive of chemical are biotech these PTC maintenance, from how is analyze embeds for with example, end Fisher allowing Thermo ThingWorx their within services their capture transforming loops their also customers; feedback themselves is remotely great space, products. for their to leveraging provide is markets. and product their to global teams. products, to further new who of Solutions. a enterprises value-added ThingWorx example end leader Fisher business is these Fisher differentiate in

where Fisher product expanding of lines their customers footprint are use and digital is well. environments across the into their we're representative Thermo trends seeing and as cases production

nature it alone. industrial of the to knew be digital the we the Given scope challenging opportunity pursue and transformation broad market, global would within this

the Microsoft. and alliances of like delivered that's Automation Of alliances with these course, why Both Rockwell again performed strategic QX. in we leaders industry goods

earlier to into QX deal start new 'XX strong kicked that in FY Rockwell alliance, in our the a production. expansions In projects robust with pilot plus year moved Automation off as alliance activity, meaningful across which the uptick the Rockwell a were Rockwell deals both provided vertical cross-section that industrial brings and markets this geographies, relationship. expertise of global in deep team reach to highlights new and Automation The the XX domain delivered different broad

main the Geographically, Microsoft above a growth. be our alliance, In of continues ACV bookings QX driver to the also strong to start well marked with year the plan. new Americas

a win more third which a proof However, at is is use and the bookings alliance case Controls, momentum global even expand who great represented Microsoft of AR of to Johnson recent point factory that alliance connected and than has of Microsoft heading our also demand a to provider building the smart systems. robust into solutions, product the A pleased in of continued pipeline leading the alliance see in a We're is into QX. control power building Europe beyond QX.

It Microsoft transformation turns and ran angles. digital efforts the the supporting different many out that in down. risk PTC, cooks kitchen independently of from Accenture Too were things JCI's slowing

So landed that strategy Microsoft's initiatives. and a factory ThingWorx their and cloud-based PTC, deliver for joined deal has the we the Azure. solution unified with C-suite a approached smart fully Microsoft to Together smart deploying factory forces Accenture and PTC's Accenture

the share discussion, great let team. leave Before I Onshape me making progress that the we're growth integrating

iceberg. SaaS like X%, our pure is as this water a XX%, week. water above new you proverbial to moved system. PTC's But think team Onshape headquarters the below fact and a lot platform. what's next-gen earlier of Onshape the the Seaport I'd like see CAD looks What into In the the PLM

growth We have quarters. big our for in to yet, convinced plans it's for say coming another Well early for SaaS, major and and I'm too Onshape I engine look forward become SaaS will to PTC. you on progress this updating much

very product which indicative QX industrial growth performance the wants their ARR our that a company performance technology mid-teens transformation systems strong to in quickly role major growing transformation, my It be outpaced business Core of need was broad undertake strong will Our who in geographies. digital record. all anchor one quarter. tenant that strength market to delivered of led that group growth is strong strategies. performance in the PLM customers' core PLM Any now in realizes view, PLM based plays PLM growth, digital across well. the In strategic as delivered XX% reflected again of ARR by of

it Take By leveraging business such with seek they attractive PTC. concurrent engineering began boats. evidence foundational as with Groupe This scenarios. more to Altogether, engineering in much bill and Beneteau, more Windchill, delivering the dealership our PTC's product there truly French PTC. into together functionality the manufacturer into highly to leveraging seeing as sale business PLM operators technology technologies to to opportunity excellence more and of who from is with Then, and rejuvenation for with power of a factory and in ThingWorx long-term and change existing makes management and capabilities extended manufacturing of material and differentiation PLM of customers management. leader growth with Creo instructions that for Beneteau and using differentiated a along win unique efficiency. and operational the Their luxury relationships roadmap modernize we're expand is that floor shop is new combination processes. AR service Vuforia, and powerful We're

our notable had the global again growth and channel. delivering Asia-Pacific high CAD year strength single-digit to too, a with Our solid start in ARR reseller team in

the is point for deal Adoption, On ANSYS nicely enterprise the to particularly average Live with Creo continuing which interest ramp our high. starting the remains continues space to front grow. Simulation partnership, in sizes

Creo remain installed adoption it, channel the new about the significant as CAD penetration business. and CSL in driving on Simulation is which promotional bullish in half programs and focus in FY QX enablement Live off call kicking we We're on CSL opportunity our 'XX a long-term of channel our Our on base. for or in generates

into ANSYS, Creo is tip discovery in broader bringing good making CSL we're the spear While the as well. with aim suite also partnership the fold the our progress, of

like To the significant years. reiterate wrap to my I'd flow comments, PTC's mid-teens cash ARR to full driving in and generating up free coming growth commitment

PLM, management, both our we're our the AR one into markets, in focus sustainable the us will of Onshape, the transition for cost rearview the premier in and IoT and firmly in gives opportunities rear significant growth confidence with to Our remain on world. that and our disciplined more and strong performance growth market CAD software With SaaS-based subscription positions portfolio with and in our plus product PTC the leadership and mirror public new our transform and development track ongoing high growth the -- companies plans on long-term. over strong

it and turn guidance. over I'll to comment Kristian that, to with on And financials

Kristian Talvitie

Jim, afternoon good everyone. Thanks, and

be references will rate to growth constant and our note I Before all I'd discussing review be that results, non-GAAP I'll like and in guidance results currency.

to going for just keep of off ask details. remarks review me highlights Let results. brief refer prepared IR remarks key Again press our this hitting my I'm to on additional and our document and with investors to start quarter a website our first release quarter available some

year-over-year QX $X.XX year-over-year was XX% which our growth be of up for low up to timing year-over-year ARR ARR ARR was growth X% consistent we for the and in due FSG and for FSG billion, we guidance above up the XX% to XX% be ARR product was which XX% was to growth quarter. outlook above mid-single-digits core, in commentary growth, rates 'XX. in growth expect and with consistent we in continue ARR XX% our with year-over-year, representing deals last fiscal fiscal to market primarily fiscal was market to also 'XX. to 'XX. provided the group in is growth of the expect ARR

of XXX 'XX, end to experienced the against of January Total perpetual end revenue million $X.XX Operating the non-GAAP increased basis program. by a XXXX. we over perpetual declined margin heavy despite EPS year-over-year, $XXX than basis 'XX from And where of and expected X, of increased perpetual perpetual decrease life XX% QX the X% year. year-over-year revenue license lastly, resulting revenue license XXX license up in compared on comparison was sales driven points QX of X% of points QX XX% higher perpetual year-over-year last

consequently obviously and include revenue or were EPS term conversion. ASC as drivers recall, impacting be And the negatively on support to impacted subscription and positively commissions changes XXX. Major revenue and can And expenses impacted. also you'll length OpEx operating by side,

achieve sets QX $XX was our full flow and adjusted free our up within expectations cash guidance. Finally, year to of our us million

ARR. Now with turning Beginning the to guidance.

Onshape original approximately XX% we're year-over-year 'XX, to range billion XX% constant half seasonality expect guidance guidance a year. prior For point booked to constant fiscal line in our of of currency $XX with to ARR or $X.XX normal embedded our we growth or driven rates deals QX ARR of $X.XX with is basis. includes X to to by billion $XX ARR and accelerating is QX year increase guidance with the commentary, and of ARR our approximately both a be business of growth currency on in positive results XX% in increasing growth the back FX guidance from of already our million in our the acquisition. the for periods. Consistent backlog growth prior and million XX% This of

flow. to turning Now free adjusted cash

For 'XX, of fiscal to $X reflecting expecting the million we're FX impact million. $XXX $XXX a positive range million of

expecting of our Now $X.XX of an $XX total now $X.XX midpoint billion billion, of outlook reflecting 'XX our outlook, fiscal million turning EPS Non-GAAP $X.XX, the QX the of approximately increase QX of year at reflecting $X.XX expected to to the performance and to $X.XX and an of midpoint for remainder FX. now FX. increase million the revenue be P&L to of guidance, guidance. We're at our $XX performance, guidance and $X.XX of is

to 'XX fiscal continue grow We operating X% expect year-over-year. approximately to expenses

With that, begin call the the to operator the to I'll Q&A. over turn

Operator

Thank you.

We first comes Our with question Instructions] the question-and-answer RBC session. Hedberg Markets. [Operator Matt Capital will now begin from

line open. Your is

Matt Hedberg

taking for pretty good, mid-teens question. out success. thanks ARR growth Great, know called pretty constant you geographic was guys. PLM my Hey, good currency I

and I a sustainability Jim think real you particular of of talk but the growth of lot through release about transformation this press you about sort of here. and forward we Could PLM talked mentioned of Europe you as growth your in tailwind durability the -- China your PLM digital being the or of businesses, this know I some growth. we look on year? a spent time in

Jim Heppelmann

years, rate to year a And very I Well, to have I I five would PLM slow year for strong September, market we down the to at had to this coming think growth over think we're if said growth you expect our going Kristian think back you which sure. X%? the remember rate, ARR

Kristian Talvitie

Yes.

Jim Heppelmann

Yes.

sort of X%. five over we're to think slow mid-teens the and that we So will years

One Now relative sticky is factors. base we're is thing very of rates This our that's high. based lot software, selling on very of a renewal and of to a ARR, PLM it. are number the very, in

there So we're because really in demand transformation. strong a where strong good of situation is digital

product is report ranked analyst one Our every have number I by ever seen.

high to to meet position demand come. product bodes in where we a a get time And renewal that's a for with so strong we're our good well that chance and rates and long

Matt Hedberg

Thanks, Jim.

Operator

you. Thank

Our next from Griffin with Jay question comes Vleeschhouwer Securities.

Your line is open.

Jay Vleeschhouwer

conjoined regard Jim. other Good to the PLM perhaps and terms three PLM you Thank of When pendulum integrated had PLM subject. on seems there there you. across PLM back letter that evening. over XX adoption or think PLM acronyms? momentum. were just business? companies your a when Hey, years are Hi, more, beneficiary Kristian business versus and and question as following what else then been last we With the among conjoin or other anything CAD for to in And Tim. words, much companies have been PLM a is, seeing that products to have up CAD software In when business either only being to times therefore your business to times is customers. have able XX How or momentum. that engineering driver or had seem to of the that to there The of CLM

Jim Heppelmann

Yes.

of PLM CAD have cross-sold PTC the that lot who think, strong sure. audience. into picture had upswings a CAD been a I PLM pendulums the brought to point And at when there the for footprint of one was and

is, transformation. drivers. in lot the we're time is Now, couple more a doing data this of think I manufacturing different One engineering a what's happening

design, process change module engineering bill manufacturing the in management PLM software we very the managed and manufacturing the as our material instructions, very to process quickly. of convert to configuration bill of in manufacturing it's system engineering MPM later and what if need engineering have update link called in that systematic the decides a they manufacturing and somebody pinpoint We to process material can so and into sort way, used of of an design an design a

design and the And is the configurable. so MBOMs. the if engineering Well, turns as instructions manufacturing it out highly

lot incremental which a thing an new reality we're it. this a today is driver, then stuff really new example, selling customers crazy. That So we into have are the configuration technology selling like driver. of content. for realizing that's other become its augmented And best-in-class, love customers that, It's management needs

project. won't big great is what configuration great say, -- really and didn't without because that's excited about great. produced But able customers could, a be of really of its the AR it of I reality in a but lot and PLM technology augmented them, right, our a -- content. we'll they if Europe truck big do didn't So all I'm I ask never company a is name Because management I to thinking

So let's project. go do this broader PLM

another in think that's that one I category. So kind digital the I transformation of driver. also put

how So but is brought and control. processes definitely it's by really products a under that. your people without even about I could of saying have strategy descriptions an digital upswing, talk the transformation manufacturing silly digital It's having you think to there

for this definitely think I that's the tailwind generating momentum is So produced PLM.

Jay Vleeschhouwer

Jim. Thanks,

Operator

Ken from Our Evercore will with next question Talanian come ISI.

is line Your open.

Ken Talanian

core net Could trended sense Thanks FSG year? a for your growth in you in last give for the taking how retention quarter to Hi. us compared question. rate for the

Kristian Talvitie

Kristian. Yes. Hi, Ken, it's

fiscal the 'XX. expecting we're the the to for modest year expect we're in here to I have. not quarterly improvement a in given we get retention But again going given have that think, reporting I say we suffice continuing variability, that the it net -- into just think to that framework guidance

Ken Talanian

sense follow-up, saw APAC. growth good the about sustainability both you like Great. Europe some growth Could a think those in that guess how traction both portfolio in we of I and portfolio give And should us looks regions? for it the as a

Jim Heppelmann

at launch traction new and mean, APAC. more business, the PTC I we normally business, a what happens US over here elsewhere, Yes. it time and I a more gains first maybe traction it think, at PTC in here Europe when and but in then gets

so see think I we natural And that's that develop, a way here. and it happening just businesses these

of the and the little get weakening, That's come then US I have that first Asia stronger a on US stronger a later. bit attribute and what times in Europe necessarily So lot to. they would without

Ken Talanian

you. Thank Great.

Operator

Saket from Our Kalia next with Barclays. comes question

is Your open. line

Saket Kalia

Thanks Kristian. But a you. talk talked question. them you little Hi, deals. my Jim. last mechanical Bit We Hi, about about can just for a for quarter. maybe here. question Kristian of bit taking a bit little ramp

You've seeing talked should variety sort reasons. it. Can of touch of talk are a for deals, broader see these back in bit you ramp of that about part of It like types ARR how deals. just benefit little just the ramp of a different ARR what parts points half in sounds that the about you the they businesses can are And for deals on strength these of make we then group, just you ramp. sense? that at sort impact of the Does

Kristian Talvitie

good Saket, Sure, a question. it's Yes.

into and have deal thanks. contract, of mechanics of XXX,XXX... start one we the kind ramp year date ARR you dates how date of book where on is just the in of to add the date, If you essence whatever in it, case start So, have right, a start that we multiple delve things not impact will ramp deals ARR, of

Saket Kalia

example then Can I and talk you mechanics? about an give the

Kristian Talvitie

Sure.

Saket Kalia

example. me lay out just Let an

solution smart to me they our have say, all factories, and and going XX cost loves factory factories. really XX customer across a to I it's want so what say, they understand Let's

first get can to the but like I XX in I'd five the negotiate deal for factories, So year. about only deployed

XX five second the in and year. third Let's say the another in year

first third a five to that's the in plus commitment year, going the a to second year. they're So the plus ramp in five XX and five plus five do year, five in

the ramp that? of now that's the commitment -- So moving in

Kristian Talvitie

incremental the worth comes on say then two that year third five the when we would XX. way year incremental we that in five year So the take one. And five in into factories. take first the -- ARR take the the come is, And we would next factories would would flow

flows date commitment. that's the on it. start mechanics the in So contractual of ARR of

of seeing terms In we're seeing where ramp where we're -- deals.

I think...

Saket Kalia

that's Yes, right.

Kristian Talvitie

We group, them in see, more in but a to the and growth product FSG core still some AR, of we least well and I any IoT would then lesser in extent, actually extent products. to see the as do of the say

Saket Kalia

helpful. queue. very back That's guys. in it. get Thanks Got I'll

Operator

Matthew Our next comes Securities. with from Broome question Mizuho

Your line is open.

Matthew Broome

capacity Hi, focused an Kristian your percentage Jim, can and on how just versus I'm hiring capacity any what Reality? curious, give to of And sales you plan update of and Thanks. so kind just IoT us sort Tim. you're Augmented of now far sort year? for on of this your total is tracking

Jim Heppelmann

sorry, it. if make sure to question I'm it I the -- So repeat going understood just that to

question terms the think how I sales are we capacity? of was in tracking

Matthew Broome

Yes.

Jim Heppelmann

one and two, that growth FSG? step in Was step divided is how and capacity core then between in

Matthew Broome

Thanks. exactly. Yes,

Kristian Talvitie

Yes. Great.

So the to tracking we for this track right terms where like capacity, are of of given kind would on in our hiring plan. be point I think we at

going to the In you to actually the specific the still FSG. on on focused back the which majority frankly I'm and then details, is compounds on terms still core various understandable spread, amount specialists IoT. is set in product increasing the have And to on but of get

Jim Heppelmann

to the a at maybe look and in sales because a way would capacity. productivity at in the land to look expand core it's significantly mean you're yet bringing higher of forth. growth, lot And another lowest in on be growth of and Solution it the new It would be would I Group. Yes. lot higher so doing even Focus deals business, be which and

Kristian Talvitie

major on complicated where everything little and It right bag. have gets you in who reps, line -- product the are also reps sell a accounts they have we more focused full

you to it be break how a that complicated. bit like will out, want So, little

Jim Heppelmann

looked that you that go is year can to this. now we the get did be thing, should to what business comes we thing way fiscal year question where capacity, need we when hiring really at for certainly basic a think growth. And You to over Which right? every takeaway is being of ago of the we behind a we capacity back the I think understand growth it used quarter. after as from? changed represented is But we do capacity the about to We would know a and deliver

many like constant, So we going capacity But more into every end a of need that it's it's step this capacity, we like then have quarter to a bringing not heads. this have don't year, to on ramp have be year more we the and big function we so the next year.

our this So improved are processes I think vastly in area.

Matthew Broome

Okay, perfect. Thanks very much.

Operator

question [ph] Our Andrew with from Berenberg. next comes

is line Your open.

Unidentified Analyst

thanks big to ask Maybe I QX the of that. taking you So, QX. FX, if that explain Onshape a guidance but pushouts deal the I ARR for a from components you us little my further? quantify there that timing guess question. could Can about can are to one, maybe happens maybe is increase.

Kristian Talvitie

Yes. Sure.

is this Kristian. So

Let's start initial quarter. last with Onshape. Onshape is already guidance, embedded in we our provided which

Jim Heppelmann

the was announced. After acquisition

Kristian Talvitie

increase favorable so Onshape. $XX from delivered quarter about is a year. the just as announced, that the that in acquisition comfortable what out very million range we from with about it's provided guidance, initial the feel results $XX have the now we're then, we There and FX there. solid the much million were After a way we for QX of more but and believe And well, through

the from FX range to was tighten to the did to what essence, XX% XX% XX% XX% really XX% then in increase impact. based we on of to the end bottom to to XX% the from up and range XX% XX% So

helps. that hopefully So

Unidentified Analyst

Thanks. Great.

Operator

from question comes Wong Guggenheim next Ken with Securities. Our

line Your is open.

Ken Wong

guys. afternoon. question my Hi, taking how for it Thanks going? is Okay. Good

Can of on of It us the positive is a so you looking more give far the how of bit and to have guys terms portfolio? the Onshape a sounds of it. at in PTC obviously feedback of little like we've the maybe very how your You're terms of and color had things customers just announce. base installed are lot trajectory in side you come receiving Onshape

Jim Heppelmann

that a our think that course felt there. its messaging, successful Yes. companies stop that thing of I very good mean, make acquired focused CAD Onshape, if they was customers to out is think of it years. for even of on a to importance And tend the there thing there. PTC And very I we was just Onshape first and Onshape I to that was The the use sure lot supportive software very put been strategy. we future sticky we've

So in some a sure up being if using to down Onshape finding it's so don't sustainable years you that end something road want the you're shut like down you place, it's that. make or

to got system. new go find a You've CAD

think Onshape within well I So was a the been received general home a big That's PTC. great success. that has message

early. I say goes it's cross-sell, really have it I draw as meaningful anecdotal honestly to to are there Now think any but mean, certainly this, not too But complementary enough use I do few a stories, we conclusions. would cases.

well in in Creo, cases. edge from but that it those as let's make And use accounts also coexistence Creo Onshape Windchill to For off peripheral Onshape Onshape platform or strategies the bring upsell call with example, we cross-sell. easy so and cross-sell then use exploring and we're Windchill and Vuforia, much actually bring will Onshape, an could to that that going to our AR both technology of to close we're for

too only it's owned we've week we very for when though, it's it be I months too to over the where -- But start phase headquarters. early, to are optimistic, bathroom, honestly move just for I'm but So and they mean had looking about the this honest. people early. it's the we're to two although past

Ken Wong

color the thanks Jim. for Great, it. Got

Operator

Borg with will Stifel. Next, Adam from hear we

open. is line Your

Adam Borg

thanks a Maybe hi And more the in guys, guys. Hi little for question. just bit talking -- AR.

IoT. but to So dig you've in on opportunities with talked a about Augmented in the cross-sell Reality opportunity just PLM, growing rates above wanted little some and market more

maybe opportunity Just within given installed how complementary more about it is with Thanks. cross-sell and talk that base? ThingWorx

Jim Heppelmann

because IoT like Yes. AR you together connect you to form to you connect I know world, meaning physical AR in And And right. have then we're experiences physical can physical physical and our that contain have I world digital the is about as mean, IoT one data, can use trying it connection I tell about the in you AR worlds to together, think another. the to and of thanks think, world I logo, about is IoT. them when the

products in are well piece combination. these The pod. beautiful So a very wonderful are definitely It the is integrated.

has In while, other technology Studio, great, fact, technology very Vuforia if you no but remember, company IoT these for are ThingWorx and complementary IoT other is both are who is they technology. we no and has the a really Studio, there best-in-class who and what's company AR there call AR

to compelling very story a is this unique and PTC. it's completely So

Adam Borg

Great. And maybe just as a quick follow-up.

deal are both And increasing focusing again. year think and in renewals. I still you new on what's I know just year, for Thanks customer towards receptivity deals duration the early guys that? this but it's curious,

Kristian Talvitie

Yes.

I early comment the in on year think really to it's that.

Adam Borg

much. Thanks Great. so

Kristian Talvitie

that it Is later.

Operator

Thank you.

next question from Morgan. JP Auty with Sterling comes Our

Your open. line is

Sterling Auty

guys. the Thanks. really Yes. still economic nothing Hi that dealing the mentioned you with in backdrop you're numbers. challenging changed has that Jim, PMI

what fundamentally mean So the say with you business label, are -- would the the sorry, caused biggest in main for the has of factors core have the you the better I business tone and change business what bulk your is and are changed so, that of that that? isn't as the the don't the but if that that on based constant, suggesting core

Jim Heppelmann

Yes.

Okay.

yet, is say, PMI what we're me it's the good a let yes, is, first in So and place not a all, good it in of place.

when not many And growth two, they digital as and versus model we want do and have revenue to a and we're our things recurring have workers. perpetual, business growth has clearly want one, business Number number something changed. a off are two businesses come that back submit then we've metrics Companies changed company and they're they're to secular. a changed So I are, laying and even transformation I cyclical, to that. would

In fact, they even those together. connect strategies might

frankly business model is the So think the I overwhelmed important, by very but secular it's piece change.

if review grew bottom to it of maintenance. down basically let's we we of XXXX. And economy. had out what after since. so mid-single-digits, and at great and license The which sales maintenance the go flat. perpetual year I if actually PTC. it back declined, licenses happened fell XXXX recurring recession a in XXXX, every had XX% remember been stream, had the the The growing happened We went on correctly went perpetual stream of stream And that X% in And a is what

So revenue you quarters ago, much very what this see you ARR recurring we points we bookings bring drop, it muted. every can that would on you is the in And X for where sensitivity happened gave point. X is a that the showed down actually effect some stream only analysis

put if all would but of points X ARR, So that dropped would over pressure XXXX XX%, bookings be again. it on

it. dropping. because where thing. a we're the going secular And up is aren't with in therefore, going actually So situation ARR bookings of They're up,

the So to PTC I simply are was when days behind highly us. correlated just PMI think

Sterling Auty

Thank you.

Operator

from comes Our next with Steve Koenig question Wedbush Securities.

open. Your line is

Steve Koenig

Thanks guys. Congratulations a on quarter. very good

was you revenue in growth actually and So, with here ARR quick expect trending? or -- my deals growth really two-thirds more AR a your that your be IoT did if question parity your business of And let's is housekeeping a had you to follow-up, on that here like going growth quarter generally, the bookings. have I and see forward. don't latter growth mind. mentioned this your is expansion How is you do above, point other masked Then going were quarters you revenue growth metric something how bookings more a that with compare

Jim Heppelmann

this Yes. many always bookings quarters XX% because was I the I've of of range expansions. some and part can been that, in quarters many commented take on recent from in it's it's

accounts really work, to the you been back and expansions you've that back come expansion. is several you are come expand, starting we've it to following much lot haven't but out work tranches and is interesting. of and land they may a get and again, really because they expand model, of beautiful then there thing And they have revenue, So ours I and which a contributed when sold, to a think

been that's So happening.

We growth more have many expansions. and defer you rates. all and particular customers correlation to And the I for need IoT talk revenue one who think or I AR to have Kristian, come back can between if at explain -- bookings times in

complicated. it's think I

Kristian Talvitie

complicated. term again, a It Yes, activity, it's I'll depends length. And it dates. depends on depends renewal remind pretty everybody, lot etc. on on just It start depends

So not deals length this length deal. but term it's term new just new of of

Jim Heppelmann

recognition. it the question but interrupt; Could I just revenue real is revenue

a you it's maybe it it a booking, maybe can't, ramp next starts maybe you So you quarter. can which recognize Maybe month, means next get deal.

murky is growth So, yes, revenue it growth. a correlation and between bookings

Kristian Talvitie

also on much kind be fiscal growth that to ARR, market And in for as a rates we which is why strong that the we're is expect sense, still to would revenue the of for better of well. north a there trying and growth to of Which cleaner business. attendance expect generation 'XX. focus growth to proxy cash We continue deliver businesses

Steve Koenig

constant maybe correct growth kind that to the your ARR now that's is little I churn prior am that that's a expansion are here, And recast now trending which guide, XX% you're Okay, housekeeping guide guess, the to activity you the I -- Is that the inverse and bit. as -- to new currency XX%. compares in right? out XX% helpful. then giving renewal XX%, XX% or your but XX% nominally to I'll question that toss is How just was and that of seeing business. your comparison question

Kristian Talvitie

in That's raised Yes, continue of FSG continue end range higher the than because then the in that time. the we we of over XXX% from of in trend to correct. perspective, that tightened core low agreed. entire businesses FX. range and churn we to expect the growth churn, a and also terms the down and Then percentage see up will

So...

Jim Heppelmann

expect long that and continue. we a been It to for has improving of time period consistently

Kristian Talvitie

Yes.

there's than So I point factors out don't remain. notable other think to those there really anything

Steve Koenig

very you Well guys Got and thank much, congrats you. Great. again.

Jim Heppelmann

great. Okay,

Operator

we hear Kim Next will Rosenblatt from Yun Securities. with

open. Your line is

Yun Kim

talked is just trend, talk increasing products on of guys want that to seeing solid you group. Obviously, Thank a be there. growth about ASP you. quarter. How you Hi some in ASP trends its assuming about I'm the the Congrats I out may guys. trending ASP your from coming Has business? percent in minimized growth I coming assuming talked very and group. ASP that of working versus overall that large about am you expand model business your core despite obviously, products Jim, increase the deals, well. from And land

Jim Heppelmann

Okay. By ASP, you really mean size. deal

Yun Kim

Yes.

Jim Heppelmann

Yes, mean to getting business, while the I size we're because small getting in we're I'd deal exactly. also size, big deals. Transaction more have more deals, growth average check

the smaller expand and didn't business really any case don't And I so course, in not this intuition then motion So ASP is would and -- be in be core me, land But adapt it much. have business but that actually front would I'm changing we because growth data in the my core than the of ever of generally convinced of fast. is adopted the growing the business. not much business in

is expand bigger So really add-ons of but would larger example a modules transactions, tends ASPs is land and have model. there there, be of the business lot to a because core although to for PLM and here tend not there

Yun Kim

it. Got

Okay, that sense. makes

Jim Heppelmann

answers. Sorry, a I perfect but that's not it hopefully answer,

Kristian Talvitie

I when were were they think were they smaller perpetual. they than

Yun Kim

sure. yes, Oh

great. Okay, a And thematic around question real also of quick more Jim stuff.

if business tell? in sure factory it lot hearing the IoT you IoT be about technology is we not you XG potentially the technology out in for or too the of market that into are you your especially or early there, Do to market. XG So, automation but a you're accelerating running this, adoption expect do to see meaningful

Jim Heppelmann

our people customers. high-speed, have and Well, for machines adapt cause grow latency to but faster devices business definitely Reality early to want certainly I factories, it's not, in think to their so to know to their low XG our if It's it would communications Augmented or and wireless too IoT important forth.

different in important we are discussions and you, So partners. it's tell several XG engaged can I definitely with

and might it I I our big LiveWorx. make sponsor IoT that companies technology And create our being want for help play, opportunities to which an XG at up forth. so ecosystem of companies can is point think see sure technology end and one this promote a IoT them that as XG I of

it's early to too important. it's definitely think but I say it's accelerator,

Yun Kim

great. Okay,

it. think that's I

on a quarter. So great congrats

Jim Heppelmann

Thanks, great. Yun. Right,

Operator

Celino from KeyBanc question with next Capital Markets. Our Jason comes

open. is line Your

Jason Celino

looks for for my taking you'll the integration you was some guiding costs the are growth year? as X% like that the about Can what think you be more big guys are quarter in But expense of year. question. we I around full Thanks other It X%. go investments of maybe on kind through making to just growth the talk

Jim Heppelmann

Yes.

couple bit had expense only we with in a the as I So timing growth right, Onshape think to months little has a of do quarter. of

then we So hiring of we normal there is loading full kind that some to And have didn't do have a back the end of Onshape. quarter's worth And plans. hiring.

Jason Celino

thanks. Great,

Operator

from hear Deutsche Alex we'll Bank. Tout Next, with

Your open. line is

Alex Tout

most, of guess also the know exposure hand moment. if same end question. end Thanks you're just at I'd interested Yes, be interested market we because automotive taking seems it's that the but your to have one not manufacturing the isn't to I terms most one at on the a for see the seeing the like specifically. in hi and challenged probably guys. the It your versus market innovate huge, need in I in comments secular are what on time. -- industry you challenges cyclical of

So, seeing what's in that the automotive in now. Thanks. the right those you're of dynamics kind of net your space customers

Jim Heppelmann

making and it believe for the relatively Because downturn, efficient factory smart those actually people are level XX%, I that their across demand a and and factory X%, of people think Yes. big looking would are processes, for most numbers. in spend XX% dumb the ought projects. We're seeing people make more IoT have very taking in efficiency it strong to production

good. And pretty There projects big is then is at PLM OEM and next probably demand I'd truck good. IoT automotive big is PLM European say that forth. the So also some we're company. phase a on so an another where working and looking mentioned expansion to demand soon I on

CAD of So on I factories. probably. CAD, much productivity but really so not we're and say PLM digital find I not the good demand right front IoT is would for coming let's a think our they PLM more transformation the now Probably from from, try demand getting is and IoT. lot coming in

Alex Tout

the color. for Thanks Great.

Jim Heppelmann

Alex. Thanks,

Operator

Thank you.

next comes Our from question Tyler Citi. with Radke

Your line is open.

Tyler Radke

metrics you improved previously guidance by looks the be then to as execution free more most expecting combination you you. given the Maybe just for the the driven well on my Thank quarter. see cash the raised a in taking The guidance guided. not on quarter you flow. didn't Thank It raise understand line flow, solid fundamental free item question. was one as cash the on in solid help outlook year, appeared much that you're why like why, currency very a -- and performance us your of

Kristian Talvitie

sure. Yes,

free at I cash look flow. cash And flow adjusted we I'll free first. with both should and So start free cash think just flow

higher. estimate So it we we out just And highlighting free we about estimates current did put actually that take but the remarks, year cash on have for currency, prepared -- cash when that put was adjusted free million $X in estimate an restructuring did the we the flow based initial not. for flow the

favorable actually currency that impact on offsets So flow. free cash

For what just say free largely just here it's again is, $X we're prudent. which by would cash the million, adjusted raise in being the FX and year early And that I is impact. flow, did we

as Of continue year, but course, revisit that's this we to we will answer. the the move through

Tyler Radke

Great. Thank you.

Operator

for remain Thank you. that we remarks. the Tim Fox's time That is the Please for on questions. closing have all line

Tim Fox

Francisco, of to Stanley's will conference Sheila. XX, And Design X PTC watch that three everybody one-on-one in today June Thanks, TMT which from LiveWorx the conferences in going starting for Berenberg's is to Conference followed June call. Conference and here Morgan us in Global York. going by in RBC's thanks joining on San XXXX Event, in save-the-date participating Hi. be to with for March, course sending inbox. And both so in a Boston, your our be additionally, New we're be

interest to our the evening, on in and have forward conference a And we'll you QX for not, be circuit the thank call everyone. seeing update April. so you your Again, months in if to sure coming in and we great look on PTC

Jim Heppelmann

Yes. Thanks, everybody.

Kristian Talvitie

you. Thank

Jim Heppelmann

Bye-bye.

Operator

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

disconnect may time. You at this

PTC (PTC) 22 Jan 202020 Q1 Earnings call transcript