We can get started. Hi, everyone. I'm Joe Vruwink, I cover vertical software at Baird. Our next presentation comes from PTC. PTC is one of the major companies providing engineering, manufacturing, and service software for physical products. Increasingly, those three areas are being connected together. That's called a digital thread, and that itself is a driver of results. Pleased to have with us today, Kristian Talvitie. He's Executive VP and CFO. This is going to be a fireside chat format. If there are questions in the audience, you can raise your hand or email session2@rwbaird, and I'll ask them off the iPad. Maybe to begin, Kristian, just an intro to PTC, an overview of the investment case, and we can take it from there. Yeah, great. Joe, first of all, thanks very much for having us. Secondly, my general counsel would be very angry with me if I did not remind everybody of the safe harbor language and forward-looking statements and refer you to our risk factors and safe harbor in our periodic SEC filings and in our press releases, et cetera. With that, PTC is now about, geez, almost 35-year-old software business. We will do this year somewhere around $2.2 billion in ARR, which is annual run rate for us, which is a subscription business. That is our kind of annual subscription billings. We are about 7,300 people worldwide. As Joe pointed out, we provide technical software to companies to help them design, manufacture, and service their products. Maybe the level set on financials out of the gates. Last quarter, PTC made a recasting of midterm growth ambitions. It was mid-teens. Now it's low double-digit growth. That comes under Neil Barua, relatively new CEO, and kind of his analysis of the business and resetting targets. Maybe just to start, what was the discussion as a team, kind of the input, the thought process that went into updating things and kind of the embedded assumptions going forward in that low double-digit growth framework? Yeah, it's a great question. I mean, I think in large part, I would actually say that it has more to do with, we'll say, communication style than any deep analysis of the business that's resulted in a different view of the opportunity. Neil had the opportunity to come in and kind of reset where he wanted the bar set, which is in that low double- digits, which we talked about on the call. He said, "Geez, our guidance for this year is 11%-13%." So it's that plus or minus. I think if you were to empirically look back at the performance of the business over the past six or seven years, it's ranged from 10%-15% or 16% AR growth through a variety of macro and other cycles. In 2020, it was 10% growth. Again, we've seen that kind of mid-teens as well. Here last year, we did kind of 13% growth. This year, again, the guidance is 11%-13%. I think on average over that time period, we've seen in that kind of 12%-ish range. That is where we ended up feeling it was appropriate to set the bar. I think the opportunity remains to be able to try to do more than that, but also recognizing that things do not always work out jelly side up. Things could be at the lower end of that as well. I think that was really the framing and the discussion that we had. Thinking of the current macro and how it can influence results, when you set expectations appropriately and you're starting with a high gross retention business, it's harder to move things around when you're setting a higher bar and a lot of your growth comes from new AcV generation, just factually speaking. I think it's worthwhile because the topic is coming up. Oh, PMI just softened. Does that mean things are getting worse? Is PTC therefore going to start to trend worse? Through recent history of PMIs being soft, the answer has been no. Your results have held in and been very good. Maybe we can talk about the elements of the model between both your customer retention or dollar retention and then how you think about capitalizing on your new business pipeline to get to that double-digit framework, kind of those two as inputs into the model. Yeah, sure. I mean, not to dwell too much on PMIs, and we look at them as well as many other indicators. I mean, I think broadly speaking, we would look at them and say it's somewhat of a barometer of the macro environment. Frankly, they've been sub-50 for kind of six going on seven quarters here. I think we've been pretty consistent in saying that the macro environment has not been great. It wasn't great last year. It hasn't been great this year. We haven't really seen a change in that overall environment. I think as we start thinking about the opportunity for growth, there are a lot of different levers that we benefit from. On the one hand, there is a macro trend that we're seeing with many of our customers, which we would call it digital transformation. I know that's a very broad term and applies to many different parts of a business. For the part of the business that we serve with our customers, if they want to digitally transform how they're designing, manufacturing, servicing their products, PLM is really the backbone for them to be able to do that. We continue to see solid interest and pipeline build within PLM. We also completed last year an acquisition of a company called Intland. The product was called Codeb eamer. It's an ALM or Application Lifecycle Management product. It's really requirements management and test management for software code, particularly important for companies right now that are seeing more and more software injected into their products. You think automotive, med device, aerospace, and defense, and others across the board. Where that's become particularly acute is in those highly regulated industries. We have been seeing some traction with Codeb eamer in the market as well. On the SLM side, we had some assets in SLM previously, which we augmented with ServiceMax and the ServiceMax acquisition, which again enables field service technicians. Many of our customers have long-lived assets that are complex assets that have long lives and live out in the field. They need to dispatch service technicians to either install or repair those devices. That is really what the ServiceMax technology does, is help drive efficiency and improve quality in those operations, which are important to many of our customers because they can have thousands or tens of thousands of field technicians. In many cases, that part of the business operates as a profit center for them. I think we've got an interesting portfolio that, again, seems to resonate with customers in terms of their digital transformation and what they're looking to do to continue to make themselves more competitive in the markets in which they compete. The order you just listed those off, PLM, Codeb eamer, service, both SLM and ServiceMax, that's the order you used in the most recent earnings deck too. You stayed on point with the messaging. Is that listed in a specific order because they're of magnitude, PLM is most important, then Codeb eamer, then ServiceMax in terms of their growth contribution? I have been beaten into keeping the order consistent. There were two that I did not really touch on. One was the SaaS transformation, and the other was Creo or CAD, which are also Creo is obviously foundational to what we do and foundational to that digital thread strategy. Of course, the SaaS transformation, which I think is going to hit this part of the software industry as well, like it has many other parts. By this part, I mean technical software, whether that is CAD, PLM, whether that is simulation, whether that is EDA. I think that eventually the technical software space is going to migrate to SaaS as well, just because in the end, I think it is a better delivery model. No, not necessarily any particular order of growth there, but those are just kind of five of the key, we will call them dollar drivers of growth. Just to focus on PLM. As we've been talking, this digital thread concept or an enterprise data solution is really important because it becomes very material in terms of new incremental users. The contract values can get very large relative to traditionally how PTC interfaces. I'll come back to that. For the moment, if you think of a traditional customer that has been using Windchill, how penetrated or commonplace is just PLM usage in that core persona? I'll throw out a number. We've heard 25%-30% of new product development is maybe using PLM. Even in R&D, there's still an opportunity to grow. Is that generally borne out in terms of how Windchill has been growing? It's been with that traditional kind of R&D persona? Yeah, it's a great question. I think that there's a lot of legs to growth still, expanding Windchill within engineering departments, but then, as you a little bit alluded to, is getting outside of engineering departments. To preface those statements, maybe it's worth thinking about a little bit of the history of PLM, which if you went back to the kind of 2000s, early 2000s timeframe when PLM really kind of became its own thing, it was then often more referred to as PDM or product data management. It was really for version control and we'll say even rudimentary collaboration within engineering departments at the time. You could fast forward now, whatever, 25 years later, billions of dollars of R&D investment later in kind of PLM as a whole. Different companies have evolved their utilization of PLM in different ways. Some of them have taken a much, we'll call it more robust viewpoint on how they could best leverage engineering data, not only to make the engineering and design process more efficient or even evolve how they're developing products into platform strategies and so on, but also thinking about how they can leverage that core product data, which is really created in CAD and then kind of lives in your PLM system, how they can leverage that not only within an engineering department, but also outside into, for example, the quality department or supply chain or manufacturing or to, again, the field service technicians that we were talking about. By the way, not only sharing the information outwardly, but also getting feedback and bringing that feedback back into the engineering department where if there are design problems or efficiencies that could be changed, that's really where they need to be fixed anyways. You could do a crafty manufacturing engineer could figure out a way around a problem, but he can't actually or she can't solve the problem that's in the core design itself. You really need to get that information back into the engineering department so that it can be fixed and leveraged again more broadly. That's the general premise and evolution. Different companies are at different stages in not only their adoption of PLM, but also how advanced they are in their thinking of PLM. Again, we're seeing some of our customers who are very forward-thinking are leveraging it much more broadly. There is an example shared on the last earnings call where I think you tripled the ARR associated with it was a med tech customer, tripled over three years. That's just one example. When you think of engaging with a customer and getting this multi-department rollout to quality supply chain at the field, is a tripling common or is there a rough framework what TCV does if it's an enterprise deal versus an R&D-only deal? Yeah, it would be difficult to really kind of create a formula just because, again, every customer is so different in where they are in their adoption curve and even how they're thinking about it. Suffice it to say that the opportunity is significant. It is significant. When you talk about having some progressive customers, are there industry groups that you find are more progressive at the moment than others? Are certain industries for PTC faster growing at the moment? Just on the PLM front, is that what you mean? Because I mean, I would say not necessarily. I mean, we've got actually a couple of good examples that go across FA& D, for example, that are robust users. We've just talked about some med device as well. You've got some industrial customers. So I think it's more customer-specific than industry-specific in terms of them thinking about the utilization. One of the interesting things that have come up recently, and I think PTC has been pretty active in resource balancing, rebalancing over time, which is how you've typically gone on to exceed free cash flow targets. I think Neil is going to continue this, but bring maybe different opportunities, scrutiny to the equation. It came up last quarter that there's resource rebalancing happening away from IoT and augmented reality towards Codeb eamer, towards ServiceMax, service lifecycle. What is it about this point in time where ALM and SLM just have a better ROI proposition? Yeah, I think actually a lot of that. Actually, before I get to that, just for the general audience, I think it is important to note that a lot of how we think about resourcing and resource allocation within PTC, and in particular within R&D, is how can we best allocate resources behind where we think the need is greatest or the opportunity is greatest, and how do we leverage the resources we have to move to one technology, for example, or another or a solution to another? We have been doing that for some time and will continue to do it. It's part of the fabric of the enterprise, if you will. We value the people, the skill sets they have. If we have them working on project A, could they also be working on project B? That's what we mean by rebalancing. The rebalancing that we talked about on the Q2 call was actually rebalancing some talent from our IoT and AR teams. It was really to PLM, to ALM, and to Atlas as well, which is kind of a SaaS platform. That's primarily where that shift had happened. Even just putting this in context, some of those folks that were on the IoT AR teams, they had originally come from PLM to begin with. I think it's good cross-pollination and great experience. Now we're actually bringing them back, if you will, to PLM, but they have a more holistic view of the portfolio, which is exactly what we're looking for, is this digital thread concept and how do we leverage IoT and AR as enabling technologies in PLM, in SLM. Being able to move these resources around, I think, is helpful in that vein. All these products can work together, and yet cross-selling is a big initiative. What's the biggest challenge typically? Is it things you can do? The product integrations can just be better, and therefore it will be less of a heavy lift by customers when they want to adopt multi-products, or is actually part of the limitation, I suppose, change management on the part of the customer and just not maybe appreciating that, like your earlier example, field tech fixing an MRI machine, that information is actually relevant to design and engineering, but it just doesn't get connected right now. They don't have a way to really connect it. I mean, for sure, for sure there's education of the art of the possible. Technology continues to advance. Things that you can do in a PLM system today or your SLM system today weren't possible, whatever, seven, 10 years ago. You do need to continue to educate the market on how things are advancing, how things work together. Obviously, PTC didn't own ServiceMax three, four, five years ago. Making sure that we're bringing customers along with that journey to bring that comprehensive story to bear is certainly an important part of the journey. Obviously, making sure that the connections of the software is as easy and functional as possible is always appreciated. Are ALM and the service portfolio, SLM, are both of those always applicable to CAD and PLM customers? Is there a very good overlap between all the industries that are using your products? There's a decent overlap. I mean, I think some of it, not every industrial company has a huge field service organization. You kind of need to think about it in that vein. Not every company is embedding software in their products at the same rate, right? I mean, think of even cars. Think about cars that are coming off the line today and how many hundreds of millions of lines of code are in those cars today versus even five years ago, let alone 10 years ago. The market is rapidly evolving. As it rapidly evolves, the needs of our customers continue to evolve. That's what makes it so interesting, frankly. You described PTC recently as the customer-friendly but commercially responsible organization, which is Kristian's bumper sticker at the same time. It was in response to a question of what's happening regarding price in this industry. There are two ways to take this. One of the big four in CAD over recent history. I do not think anyone has seen a gross retention improvement that matches PTC. That is one element of customer success and that thing stands by itself. The other is that we have been in an inflationary environment and certain vendors have been very aggressive. I think PTC has taken a little bit different of an approach. Sitting here now, do you feel like all of these past decisions actually give you kind of an advantage going forward in that you have maintained good relationships? You have not been aggressive in certain of these levers. Going forward, there's maybe more optionality in your commercial relationships versus what other vendors are dealing with? Yeah. I mean, I do think it is a core tenet. Again, PTC has been in business for almost 35 years. We have some customers that have been with us for almost 35 years. If we get engaged with a customer, we think of that as it's going to be a relationship that's going to last hopefully decades. Being overly aggressive on something like price may feel good in the short term, but it is not a recipe for a good, healthy 10, 20-year kind of relationship that we want to have with our customers. Now, also being commercially irresponsible is also not the right answer. We need to find the right balance and make sure that we're treating our customers fairly, but also recognizing that we are trying to run a business and we want to do that efficiently as well. There was an updating in the proxy, this year's proxy, where in terms of long-term performance, that's now tied to organic ARR. Does that kind of reflect something we were just talking about in that as part of the commercial relationship, you've actually worked towards longer duration relationships, longer commitments. Organic ARR over the long term is therefore a more relevant kind of apples-to-apples comparison? Yeah. I mean, I think that we view organic ARR growth as a good barometer of how much value we're bringing to the market. We could overlay some of the commercial terms. Again, under previous regimes, my predecessor was in favor, for example, of annual contracts. I think that I actually tend to favor longer contracts. Three years, I think, would be a good target. We're not there yet. Over the past four or five years, we've gone from on average about one year to on average about two years. I think that is a good target range and enables a healthy relationship between us and the customer where we can get stability, they can get more price certainty. I think it just helps evolve the commercial relationship. Over time, I mean, frankly, to a certain degree, it also de-risks in very turbulent macros because many customers are signed up for long-term contracts. In a short-term disturbance, they can't make a hasty decision, which they would have likely regretted later anyways. I think there's some benefit to that. Over time, again, the idea with the subscription business is that we're continuing to provide ongoing value to our customers and growing value. We think that organic constant currency ARR is the right way to think about that. With a minute remaining, net leverage has come down quite a bit. Stepped up for a period of time after ServiceMax, but now that's definitely in check with just more flexibility and the cash generation going forward is going to be. Our C is under three times levered. In check. C is under three times levered. Unless we had a better use for the capital, we would look to return approximately 50% of the free cash flow to the shareholders, to the owners of the business. Of course, again, always being mindful of M&A activity opportunities as they may arise. Again, we're well under three times levered at this point. As we said, as we close out the year here and another four months or so and start thinking about our fiscal 2025 plan, we'll revisit the balance of share repurchases and debt paydown as we get into the fiscal 2025 planning process. That's great. We're out of time, but please join me in thanking Kristian.