We've done this several times through many, many, a couple different times of your, of your tenure at PTC. But most importantly, this mustache, my gosh! I mean, are you kidding me? Every year. The fact that this falls in November is just... Every year I'm like, "Maybe," and then I'm like,... I'll let you do that. So thanks, thanks for, thanks for supporting Movember. And yeah, November can't be over soon enough, is that, is that the comment? Pretty much. Okay. Well, we're getting there. That's what I'm hoping for. Oh, yeah, well, you can do it. He does it certainly better than any of us. So, Kristian Talvitie, PTC's CFO, and then Matt down here in IR. I think there's nobody else from PTC here, as far as I know. So thanks for joining us here. I'll run through questions here, and, you know, if you have questions, let me know. I will stop here in, I don't know, 20 minutes or so, and we'll see if there's any from the audience. I'll just preface this fireside with this is one of our favorite opportunities from a stock perspective. I think there's multiple growth catalysts, the profitability side of it, the multiple expansion opportunity. So when I look in kind of the midcap space, I'm really intrigued with, with PTC, and it's really driven by product. So we're gonna touch on that stuff in a second here, Kristian. But you guys just came off of a Q4, and, you know, there's been a lot of, you know, you look at PMI, and, you know, you freak out, yet your results have been very, very consistent over the year. Maybe just level set us quickly on, you know, your ability to deliver consistent ARR, and, you know, maybe even more impressively, free cash flow during a lot of this uncertainty. Yeah. Well, first of all, thanks, Matt, for having us, and thank you all for the participation and interest. You know, PTC has gone through various evolutions, including product, but also including business model. Yep, yep. And, you know, frankly, compared to five years ago, you know, the business model that we have now, which is a subscription business model, still primarily on-premise subscription, so as to differentiate between SaaS- Yep. ... and the subscription that comes with that has, has really been helpful and some of the things that we've been doing along with that to help weather some of these more more turbulent you know more turbulent macro environments that we've been in on the top line, but as you point out, maybe even more so on the bottom line. And, you know, on the top line, again, multiple different vectors of growth opportunity. So, you know, we've seen softness in pockets, and then we've seen that offset by strength in other pockets. Yep. Right, we could talk about the channel, with, you know, CAD, for example, for the past few quarters, has been, has been softer- Yep. ... offset by, for example, you know, some real interest that we're seeing in ALM right now- Yep. ... with Codebeamer. I think it's also fair to say there's you know, no doubt that we've seen the impact of challenging macro. You know, on our slides in Q4, we show a slide that shows how much net new ARR we added in you know, last year or the year before, and you can see that last year we added about the same amount as in the year before. Yep. So we'll call it, you know, flattish- Yep. ... flattish organic growth there, I think is indicative of a difficult- Difficult macro. ... difficult macro. Yep. On the bottom line side, also very near and dear to my heart, you know, because of nuances with ASC 606, which is software revenue recognition for an on-premises subscription company, it really makes using revenue, and therefore the entire P&L, challenging. So we talk about ARR, which for us is annual run rate, and which is effectively our billings, annual billings, and we bill annually upfront regardless of term length. It's always on an annual basis. And then for our bottom line metric, we use free cash flow. And ultimately, I say all this because, you know, the way that we think about the business is really on a cash basis. It's cash in, cash out. Most of our cash coming in is on a recurring basis, and frankly, because we're a software company, most of the cash out is also on a recurring basis. So when we're thinking about making investments, we're trying to be mindful of the macro environment that we operate in in general. And frankly, I would say that we... A lot of our expense or investment growth is more tied to bookings than to ARR- Yep. ... which is the top line. And so in a more challenging, i.e., flattish kind of growth environment like that, you know, I would say, well, we don't really need a lot more salespeople to sell the same amount- Yep. ... that we sold last year. Yep. We don't need more G&A people to, you know... Again, we may wanna elect to invest in R&D, but that's not really gonna help this year's or next year's sales. That's kind of future sales, and those are important investments, and so we'll make those. And we've evolved the quarterly budgeting process really to line up with, you know, hey, here's what we're seeing. Should we release more funds, or, you know, sit tight for another quarter? Or if we wanted to invest somewhere selectively, where might we do that? And, you know, what that's resulted in, frankly, is pretty consistent cash flow- Cash flow, yeah. cash flow growth, and that's, you know, really how we manage the business, so. So let's talk about sort of some of the core, you know, let's talk about core CAD and PLM. You know, you continue to display, you know, sort of strong growth there, double, double digit-ish growth kind of in core. What do you think's... You know, obviously, you know, then, you know, on a net new, you know, it's been more challenged, but still, you know, good underlying growth for core. What do you think has been driving some of that? And, and we'll, we'll talk about, you know, Windchill+ and Creo+ and, and, and fun things like that, but just like, like core Windchill, core Creo, where are we in that cycle? And, and why are you, why are you effectively taking share on a market growth perspective? Yeah. Great question, and I think let's start with, let's start with CAD, 'cause we really break out our reporting into CAD- Yep. ... and PLM. Within CAD, I would say it's primarily two different variables. One, much of the industry still actually sells on a perpetual basis, although they're making migration to a subscription model as well. And so there's just... I'm not gonna get into the mathematical explanation. We've done it, I think, two investor days ago. You can find the math- ...on the website. But the subscription model is just gonna grow faster than the perpetual model, even on the same underlying kind of seat growth. So part of it, part of our CAD market growth outperformance is simply that business model difference. And then part of it as well is, you know, I think we are taking share with Onshape right now, again, relative to the overall industry- Yep. ... even relative to our CAD portfolio. Small numbers at this point, but it is, but we are seeing some share gain there. So that's on the CAD side. On the PLM side, I would again note the business model difference, and then I would also say there, I think we are also taking share with core Windchill, as well as seeing expansion of the use of Windchill, of the PLM system, further outside of the engineering department- Yeah. ... for, you know, decades now, CAD and PLM have been engineering-centric tools, and now it's really been more about leveraging that rich product information, the product DNA, outside of the engineering department and into, for example, quality or into manufacturing or into service. You know, PLM is really the backbone for that kind of digital transformation in our, in the part of the enterprise that we serve, so. I wanna talk about... 'Cause it really feels like competitively, you guys are starting to separate... I shouldn't say starting. You have been separating yourselves from peers for quite some time, first on the subscription transition, but even more so on the SaaS side, and Onshape and Arena, and obviously the Plus variants and with ServiceMax. Let's spend a couple, this is, we could keep going on Windchill alone, but I know that you're incredibly bullish on just Windchill. But let's talk about Windchill+, because it's been out for, has it been out for a little over a year? Yeah, coming up on almost- Two years? Coming up almost two, I think now. Really? Yeah. Okay, that's my COVID dog, dog year math. Yeah. Yeah, okay, almost two years. Why has that been such a disruptive product? And are you seeing, you know, the conversation of Windchill, or Windchill+ for that matter, start to encroach competitively upon market share that historically has not, you know... Maybe customers don't switch solutions all that often, but, like, in terms of net new business, your win rates seemingly are a lot higher today than they were years ago. Is Windchill+ sort of a key component to that separation? It's a driver. You know, I think, if we just talk about SaaS in general, and again, I guess I'll just offer one guy's opinion, but, you know, my belief is that the, the technical software space in general is ultimately going to move to SaaS, just like other parts of the software industry. There are some historical reasons why it wasn't a first mover. Yeah, yeah. We can save those for anybody who wants to talk about that. Well, call us up later. It's a longer discussion- Yeah. ... but there's some historical reasons for that. And then there's, you know, the future opportunity in front of us, and I think it's, at least for me, it's more of a question of when, not if- Yeah. ... you know, the bulk of the technical software space is gonna move as well. So we are seeing, you know, we are seeing traction. We're seeing early learnings, you know, particularly with what we'll call net new deployments of Windchill+. Those actually are going pretty smoothly. And then with what we would call lift and shifts, which is migrating a customer who has an on-prem deployment, migrating them from that on-prem deployment to the SaaS here, I would say, you know, it depends. It depends how customized and- Yeah. ... and kind of what, how old of a version of the platform they're on. It's not that it can't be done, it's just that the older the version and the more heavily customized, the more complicated it is, and, and the, the bigger the lift to shift. But we've been having good success, success there, as well, and every time we do one, we learn more, our partners learn more, customers learn more. And I think it all just will eventually build into, into further momentum. But, you know, right now, I think we're still in the flatter part of the S- curve. I mean, and I think, you know, like, investors always want more, and they see that 2x uplift on conversion as just like, "My goodness, could you push a little faster on that?" What are some of the biggest factors that determine... I, or I, so maybe said differently, what are the things that you're looking at both internally and from a partner perspective, to maybe even drive faster conversion there? Or is it just really the customers are like, "You know what? I'm gonna move when I'm ready, you know. You know, come back in a year," and- Yeah, I mean, a lot of it is customer readiness. A lot of it, you know, we're still working on the, you know, well, the back end as well for certain, certain parts of, certain industries, right? You need to have certain certifications, and so on. So there's, there's stuff that we're doing on the, on the back end to make sure that we're ready. And, and then, you know, from a customer perspective, again, they need to think about how complicated it is, when their next upgrade- Sure. ... is coming, you know, what their overall strategy is relative to on-prem SaaS and how quickly they wanna move. They have their own cost calculations they need to do. But again, I think it's a question of when, not if. Yeah. Do you think I mean, you've got, Creo+ just came out this summer. So Windchill+ has got a bit of a head start. Do you, you know, in five years' time, do you think you're gonna see Creo+ conversion at a faster rate than Windchill+, like, just from a core, like, design phase? Or do you think they'll be kind of similar, with obviously Windchill having a bit of a head start, Windchill+ having a bit of a head start? Yeah. It's a great question. I'm a little bit loathe to answer it, 'cause I know that my product guys are gonna give me a hard time- Yeah. ... when I get back. So if you want the technical answer, you'll have to go to them. If you want my opinion, I think if you fast-forward five years, again, one guy's opinion, I think we'll have seen the momentum pick up faster with Creo than- Yeah. ... than Windchill. It feels that way, just from an outsider's perspective, but- But you can't hold me to that. Yeah. Yes. I'm gonna get in- No, we won't. We won't. They're gonna move at very similar pace. What's that? His lanyard? Oh. Little louder? Okay. Okay. Sure. Uh- Normally, nobody ever says that to me. The other business that we're really excited about, and it'll dovetail into Neil, is ServiceMax. And I know we've spent time on the road here since Neil was sort of brought in as CEO, and it just feels like there's an incredible cross-sell opportunity with ServiceMax. What is sort of the fo- You know, 'cause you gotta... I mean, the thing about PTC that I love is, you could have a number of drivers, and they don't all have to work for this thing to be a very consistent growing story. But it really does feel like ServiceMax, you know, if you're using Windchill or Creo, you ought to be using ServiceMax. So how do you think about, and how does Neil and the board and Jim think about that opportunity, and the ability to move, you know, quickly and sort of like directionally smart in that domain? Yeah, I mean, I think that's right. I think that, that's exactly why, you know, we made the acquisition, because we believe that there is real value in, linking, if you will, the service system of record to the product system of record, right? In this case, which would be PLM and obviously ServiceMax. And so that is part of the, you know, the closed loop model- Yeah. ... cradle-to-grave model that you know that we espouse. You know, I think that also we are optimistic about the future opportunity for ServiceMax as part of PTC. You know, we're working on integrations with other parts of the SLM portfolio, including Servigistics, which is kind of spare parts- Yep. ... or inventory management spare parts management. Working on integration, actually to Windchill, as well as integrations and capabilities leveraging ThingWorx, IoT, and Vuforia augmented reality. So I think all that is true. I think that ServiceMax, just like any other business, and now it is part of us, but not immune to the macro, as well. You know, so I think that, again, we, you know, we, when we acquired them, at that beginning in Q2, we set out a target of $170 million- ...in ARR for the end of the year. We did $170 million in ARR. I know also when we acquired them, we said it was kind of a mid-teens grower, and we thought that it could, over time, get to high teens. Yep. I think we all still actually believe that is true as well. Just given the macro environment where we are right now, I'm not sure that I'd be betting on fiscal 2024 as being that inflection year. So I think we see, you know, kind of more of the same here, and we'll see what happens with the macro. If a customer's not using server- your, call it your broader SLM estate, what are they doing? What are they- Yeah, for complex field service management, either they're running their own homegrown, really, thing. There is another competitor out there called IFS that we run into periodically. Or they're trying to leverage, you know, a system that's probably not quite right for it into managing that experience. So, you know, again, we think that there's a lot of opportunity there, especially once we continue to integrate the product portfolio. So today, when you think about cloud and SaaS, it's obviously very early Creo+, Windchill+, it's ServiceMax, it's Onshape, it's Arena. Is that kind of the bulk of cloud and SaaS today? It's the bulk of it. I mean, we have some FlexPLM which is kind of a re- Yeah. ... retail PLM. Yeah. We have some of that, that is also SaaS. We have some Servigistics, that's also SaaS. But certainly Onshape, Arena, ServiceMax are all native SaaS. The other ones, you know, we'll sell in an on-prem or, or a SaaS environment. You guys don't break that out, that mix today, do you? Is that- The mix of- Of cloud SaaS to the total business, from an ARR perspective like? Ending fiscal 2023, we ended right around a quarter of the business. A quarter on cloud and SaaS? Yes. Okay. At- ARR. Yeah, ARR. Okay. Yeah, it seemingly feels like that, that when we sit here a year or two, three, five years from now, that's seemingly... I mean, it'll be an interesting catalyst, I think, from a growth perspective, and I think there's a profitability angle there as well. That's helpful. Get your questions lined up here, 'cause I'll ask a few more, and then we can get to some out in the audience. Talk about Neil. You know, what is... You know, Jim's been part of the business in some form or fashion for 27 years, which is an incredible run. Talk about what Neil means to the business. Why Neil? Sort of an impression from a customer-facing or internal PTC perspective. He hasn't been there long, but sort of like, help us think about a rather, you know, significant changing of the guard. Yeah, sure. So for those of you who don't know, we're obviously in the midst of a CEO transition. Jim is announced his retirement, and we announced Neil Barua as CEO-elect. Neil Barua was the CEO of ServiceMax, which we acquired now about nine months ago. And so in terms of how's that transition going, listen, I think that it's going actually in a very orderly fashion. I think that Neil and Jim have been spending a lot of time out on the road- Yeah. ... meeting with customers, meeting with employees, meeting with partners. We're trying to make sure that Neil's getting his share of time with the investment- Yep. ... community as well. You know, I think he has a good understanding of the overall business. I think he's digging in deeper and deeper into the many aspects of the business, which is great. I think that, you know, he's doing a good job at building, at least from where I sit, at building relationships with, you know, with a broader team as well. And I think that's actually a super healthy part of the transition, that he actually is getting a team, many of whom have been there for- Yep. ... for a long time, right? Including, you know, Mike DiTullio- Yep. ... the COO- Yep. ... including the chief legal officer, including the head of strategy, including myself, including, you know, the head of sales. There's just a lot of people who are in it to make PTC successful, and what that also means is we're all in it to make sure that Neil's successful- Yeah. ... as well. Yeah. You know, so I think he's doing his part in getting engaged. You know, I think Jim's doing his part in making sure that the transition is happening smoothly, that he's transitioning as many of those relationships as he can. And that's where we are. Cool. I'm gonna pause here for a second. Is there, is there any questions for folks out here? Yeah, up front. The microphone's coming. If you just looked across the existing client portfolio and then the product portfolio, could you give us kind of a status about how well you're penetrated, you know, if you thought about the opportunities just inside the client base? Yeah, it's a great question, and actually one we've been getting, increasing flavors of or variants of. And so on the one hand, I'll try to answer it like this in a very brief way, while also then saying that this is, I think, something that we're gonna try to address in a more fulsome fashion, when we have an investor day, which will likely be sometime, sometime in the spring, once Neil's you know fully- Yeah. ... ensconced in his role. But you know, I think this has been a core tenet of PTC's success for actually a long time. And I think that's you know one thing that we've been able to do well, is actually take new technologies, integrate them with some of the other existing technologies into the CAD PLM technologies, and penetrate them further into the base. You know, I actually think we have a lot of opportunity to continue to grow, even just within the base with the portfolio that we have today. Let alone taking- Yeah. You know? Yeah. Taking share. Raise your hand if you, if you, if you've got another one, but I'll keep going. You know, the cash flow generation has been remarkable. And you know, I think even within the guidance range you provided, I think we've had conversations that, you know, you know, we may debate, you know, is it, is it gonna be 11%, is it gonna be 12%, 13% ARR growth, whatever it might be. It feels like that kind of, call it $725 million-ish free cash flow feels pretty solid right now, and I think it was you, you mentioned it before, tied more towards bookings than ARR. How do we think about the ability to flex or, or I guess confidence, first of all, in kind of that free cash flow range? Seems high to me. But then how do we think about the ability to flex that even higher? You know, if maybe PMI starts to improve a little bit or, you know, 'cause I know there's... If it's not as tied to, you know, ARR, you know, is there torque in that if things start to get better, from a macro perspective? So, number one, A, thank you for noticing, 'cause again, it's a very different business than if you went back and looked at the prior- Yeah. ... you know, five-year- period, 10-year period- Remember- 20-year period- ... I have battle scars, and so do you. Before, before 2020. And then, secondly, I would say that I agree with you, that I think the confidence in that cash flow range is or guidance is higher than, you know, am I gonna bet on the high end or the low end- Yeah. ... of the range- Yeah. The ARR range, I don't know. You know, with probably the one biggest exogenous variable being FX rates- Sure. ... which we're mindful of. But, you know, absent that, in terms of upside, upside torque, I would say, because of what I was talking about earlier with how we, you know, how we manage the business and how we think about expenses, to the extent that we actually started to see, you know, bookings growth and net new ARR growth- Yeah, yeah. ... and ending up at near the high end of the range, we would actually be opening up more investment spigots. So, you know, I'm not 100% sure. I feel pretty comfortable with the range. Sure. Just leaving it there. Sure, that's, that's helpful. Maybe to close, there's a lot more that we could talk about here, but I've known you for a long time. Let's take the macros aside, 'cause who knows what PMI is gonna do next month or next year? Your level of enthusiasm today versus a year ago, two years ago, three years ago, how... can you help us think? 'Cause this is... I mean, from a CFO, you want this kind of... You know, you want kind of an even-keel guy. You know, you're not the hype man, necessarily the business, but your enthusiasm for the economic value that PTC is generating, where is it today versus a couple of years ago? Macro aside, again, I mean, is it, are you as bullish as you've been on kind of the core tenets that are driving this business? Yeah. I mean, over the long term, I you know, this business, A, this industry in general, technical software, and, and, B, PTC specifically, is really a unique value proposition. The tools that are used to create everything that you... trains, planes, automobiles, bicycles, you know, whatever- Yep. ... and next generations of those and all of that, it's all based on this technology, which makes it very sticky to begin with. And couple that kind of very steady end market demand with some other secular tailwinds, like ESG, again next versions need to come out. Yep. Decarbonization, everything else. Everything can be made faster, better, lighter, cheaper, which just leads to the steadiness of demand. And then couple that, frankly, with the business model transition that we've made, and I'll talk about, you know, the perpetual to the subscription model, is really been great for the business. It's been great for customers, because the steadiness of the cash flow allows us to continue to reinvest in the business, even in seemingly difficult macros, right? So that's a great thing. It actually allows for generating great returns, you know, as well. So, you know, I think that's a great model. You could layer onto it, SaaS- Yep. ... that's a delivery model. That's a demand question, but that to me is again how customers ultimately wanna consume the software. But it's really the fundamental underlying demand for the software that I think is most important, and then the model that actually generates the cash to keep the whole thing moving. I'm very- Yeah, excited about that. Yeah, and from a stock perspective, just another plug, I just think that the... I think there's a lot of opportunity to revisit PTC, which is what I tell people. People who've been around the block for more than a decade or longer kind of remember the old PTC. But I think in some regards, this is not the old PTC for so many reasons. And I think if people sit back and look at the free cash flow generation, especially versus peers, you and I have had that conversation, something's not right. Either some companies are valued too much or you guys are undervalued, but it really does feel like there's a real opportunity. So yeah, PTC does remain a real favorite of ours. So really, Kristian, from all of us at RBC and Matt, thanks for coming. Kristian, all the best. Matt, thanks for having us. Thanks, everybody.