Good morning, ladies and gentlemen, and welcome to PTC's Third Quarter 2013 Results Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded. I would now like to introduce Kristian Talvitie, PTC's Senior Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us on today's Q3 earnings call. As a reminder, today's call and Q&A session may include forward-looking statements regarding PTC's products or anticipated future operations or financial performance. Any such statements will be based on the current assumption of PTC's management and are subject to risks and uncertainties that could cause actual events and results to differ materially. Information concerning these risks and uncertainties is contained in PTC's most recent Form 8-K, Form 10-K and Form 10-Q on file with the SEC. Unless otherwise indicated, all financial measures in today's call are non-GAAP financial measures. A reconciliation between the non-GAAP measures and the comparable GAAP measure is located in the Q3 '13 press release and prepared remarks document on the Investor Relations page of our website at www.ptc.com. With that, I'll turn it over to Jim.

Thank you, Kristian. Good morning to all of you, and thank you for joining us here on our third quarter fiscal 2013 earnings call. In our third quarter, we delivered earnings that were at the high-end of our guidance range, coming from revenue that was at the low end of our guidance range. Naturally, we'd like to see the company deliver stronger top line results, but this recent trend of delivering strong earnings growth, even with lighter than desired revenue growth, is largely attributable to the disciplined execution how our margin expansion strategy that we told you about years ago. Our progress and margin expansion has allowed us to hold our EPS guidance relatively constant all year, despite the pressure of increasing revenue headwinds. We are now nearly 4 years into our strategy to drive a 20% compound average EPS growth rate through a combination of margin expansion and revenue growth, and we are right on track with that plan. We continue to believe the company should be able to achieve an operating margin in the 28% or even 29% range in the years beyond 2015. So there remains a good runway of margin expansion ahead of us, and we see ourselves in a position to deliver superior earnings growth over a multiyear period going forward. Most economic outlook has suggested the macroenvironment would improve in the course of this year, but it's clear from our results, and from those of our peers, that we've not seen any meaningful improvement materialize yet. In this past quarter, we saw an additional macro headwind develop as the Chinese manufacturing economy suffered an unexpected setback, which translated into a more difficult selling environment and disappointing results in our Asia Pacific business. This factor, which we weren't anticipating 90 days ago, served to move…

Thank you very much. As Jim said, we're pleased with our Q3 earnings performance. Gross margins increased at 73.2%, operating margin expanded to 22.2%, and we delivered earnings of $0.45 a share, up 22% year-over-year. Our favorable earnings performance in Q3 resulted from the combination of lower overall spending, higher services margins and favorable revenue mix. For the 9 months of FY '13, our operating margins have increased by 220 basis points from the prior year with, again, approximately half of this improvement coming from increased gross margins and the balance from leverage on operating expenses. I would also note that our operating results for FY '13 have been strong, we've been dealing with significant unfavorable headwinds related to foreign currency when compared to FY '12. In Q3, of '13 foreign currency shifts, particularly from the yen, negatively impacted our reported revenue by $8 million and EPS by $0.03 a share when compared to the prior year. On a constant currency basis, our non-GAAP Q3 EPS would have increased by 30%. A highlight of our Q3 performance was cash and cash flow. We ended the quarter with cash of $257 million, up $16 million from Q2. Cash flow from operations was $85 million. We paid down $40 million on our credit facility, repurchased $20 million in PTC stock and spent $7 million in capital expenditures. Now looking ahead to our outlook for Q4 and FY -- and the full year. Given the challenging macroenvironment, we expect revenue to be in the range of $330 million and $340 million, including license revenue of $95 million to $105 million. We expect to deliver EPS of $0.50 to $0.55. For the full fiscal year, we expect to be in -- revenues to be in the range of $1,280,000,000 to $1,290,000,000 and EPS to be the range of $1.72 to $1.77. We thank you for your support. I will now turn the call back over to Kristian Talvitie.

Great. Thanks. I think we're going to turn the call -- open the call up for questions. [Operator Instructions] And with that, Nickie?

[Operator Instructions] Matt, your line is open.

Yes, I think one thing that stood out to me was in your commentary around expanding pipelines, I think specifically in the U.S. I wonder if you can give us a few more details on your confidence over there, as sort of what you're seeing?

Yes. Good morning, Matt. It's Jim here. So as you know, we went live 4 quarters ago with the salesforce.com, CRM system, which we're happy to have because it does give us a high fidelity view of what's in the pipe. And then it allows us to track close rates on a quarterly basis, on a geographic basis, on a segment basis and so forth against that pipeline. So what I would say is from Q3 to Q4, our pipeline is significantly stronger. If you think about close rates for a minute, sort of an industry rule of thumb would be that you'll close 1/3 of your pipe. If you look at what happened in Q4 a year ago, we did better than that, sort of Q4 magic, if you will. In Q1 -- in Q2 of this year, we were right on that industry metric of closing 1/3 of the pipe. This past quarter, we did less than 1/3 of the pipe and really feel that, that's the pressure of the macroenvironment, is it's a little harder to close these deals in the quarter. So as a look at Q4, we have a pretty strong pipe, but we're sort of operating with the assumption that closed rates would be challenged like they were in Q3. But at some point, as the economy gets better and the close rates drift back toward sort of industry-standard, and really what was PTC standard, we'll deliver some pretty interesting growth off the pipeline we're tracking, if that happens.

That's great, that's helpful. And then maybe as follow-up, I guess, to Jeff on -- we do appreciate the initial look at the fiscal '14. I guess I'm wondering from a high-level, can you kind of talk about how license would shake out of kind of at assumption of low- to mid single-digit revenue growth?

Yes. Just as a comment, what we're assuming in that, kind of outlook into the next year is a stabilizing economy. So it doesn't get worse, it doesn't necessarily get better. We're also assuming stable currency just as a point of reference. So we would expect the license revenue to be higher than the overall revenue for next year. So that's probably in the, somewhere in the mid- to upper single-digits. And again, as a function, as Jim said, we see good activity. We see a lot of the building in the pipeline and it's really a function of how we close that and what the timing is. And so I think we feel this is an appropriate level of guidance to provide at this time. And we'll give you better update at the end of Q4.

Next question comes from Steve Koenig from Wedbush Securities.

I'd like to ask about how the quarter ended. Did you see any large deals get pushed out of the quarter you may have expected to close? And you also made reference to the large deal in Japan. Did -- were there -- was there a large -- particularly large deal in the Americas that contributed to that fairly good result?

Yes. Good morning, Steve. Yes, I think there were a handful of large deals that pushed and a few more that came in but downsized a bit. So definitely, the pipe in Q4 gets a little stronger, simply by the fact that some of the Q3 deals slid into Q4. To cover an issue you didn't quite ask, but it's related, is there any competitive pressure? I would say by the time we're forecasting a deal, we're largely through that competitive dynamic. We're past the competition phase, and we're into the negotiating and closing phase. So all the deals that pushed, none of them are competitive. Of the deals that downsized, none of them are competitive. At this point, they have previously been competitive but we're through that phase. So it's really just a question of when we do we close them and at what size.

Okay. Well, that's great. That was related to my follow-up question. I think for the follow-up then Jim, what I'd like to ask is, maybe looking a little more broadly past the Q4, how do you guys think about the competitive dynamics and your share and how that's the same or changing in the CAD and PLM market segments?

Yes, I think, if you look at our 5 segments, probably in CAD, we have the least bullish story. We sort of feel like we're our growth would be at or a maybe a modest notch below the industry. But a lot of that growth for everybody these days comes from the base. There's not a lot of share shifts going on. We have a product cycle ahead of us that we think could be helpful. But we're least bullish relative to the industry and CAD. If you switch to PLM, we think we will win every major competition as we go into it, and 80% of the time we do. If you look at SLM, we feel like we don't really have competition, that we somewhat invented this category, and between ourselves and Servigistics, we were the premier players. We're teamed up together today. We feel pretty good about it. ALM, it would depend a little bit on how does the customer see this. Do they see software as software or do they see software as part of a manufactured product? If they see software as part of a manufactured product, and they worried about the whole product, they'd like our story. If they think software standalone, then there'd some big competitors, IBM, Microsoft, HP, et cetera, that would be in strong footing as well. So I think, in general, we feel like we will outgrow our competitors, particularly in the segments of our business that really represents the growth opportunities.

Raimo Lenschow with Barclays.

I want to go back to the economy, sorry for doing that. If I look at kind of some of the leading indicators in terms of I for ISM, they start to look slightly better, even in Europe where your numbers were not that great. Can you just comment a little bit what you see in Europe there for you that's -- because the numbers still were relatively weak, but I would hope that pipeline is starting to build there, that's why.

Yes. I think that's a fair expectation and sort of aligns with what we see. If you look at our European business, it was down a bit in '12 and down again in '13. If you look at our assumptions for '14, which are really a forecast based on our pipeline, we're actually projecting some reasonable growth in Europe, a rebound, if you will. And so I think that the macro factors, the macro data points sort of reflect that as well that the situation in Europe appears to have stopped getting worse and might be actually starting to get better. So it's too early to call that for sure, but that's what we see in our pipeline and that's what our FY '14 color would imply to a limited degree anyway.

Perfect. And then the one follow-up I have was, while, first of all, thanks for giving us kind of the beyond '15 view a little bit on the margin drivers. Can you just kind of highlight a little bit, what do you think kind of next drivers would be to kind of, continue to have fair progression on the margin side?

Yes, so just to add some clarity to that. Back in, I guess, it was probably 2009 when we outlined this margin expansion program, maybe it was 2010, we talked about the front nine and the back nine. At that point in time, we said our target was 28% margins, but only 26% by 2015 timeframe. So we always had a view that there was more beyond 2015, but we only were showing a financial look through 2015. So I think that we have some new ideas that have come up since we've been working on that front nine, back nine for the last 4 years, some new types of service offerings, some new efficiencies in other parts of our business that might allow us, for example, to take our services margins to a number that was meaningfully higher than any number we've ever shared with you. So I'd say, stay tuned. We'd like to give you more color on that at a Analyst Day that we're hoping to pull together later this year. But we think that there's definitely the opportunity to get to the 28% we saw 4 years ago, and we think that if you ask us the question again today, we might think it was 29%.

Sterling Auty from JPMC. Sterling P. Auty - JP Morgan Chase & Co, Research Division: In terms of the restructurings that you've done, can you give us a sense of where your sales capacity and productivity is today? Meaning, once we start to see economic expansion pick up in demand, how much can you layer on and produce before you actually have to start increasing headcount again?

Yes. So that, too, is a very interesting question because what's happened in the last couple of years is that we added a fair amount of sales capacity and perhaps because the macroenvironment, gave it up in productivity. If you look year-over-year, we have more capacity, we don't necessarily have the growth that we would expect. So simple math would suggest less productivity, particularly if you look at it versus 2 years ago. So we feel like, right now, we don't need more capacity for FY '14, even to support the sort of color we gave you. But what we need is a rebound in productivity. And we have a number of strategies to try drive up that productivity. One of them, obviously, is the macroenvironment beyond our control. That would help a lot. But separately, internally, we had some interesting strategies. If you think of our front nine, back nine, one of the things that was on the back nine was better, tighter solutions that would have better value prop, shorter sales cycles, et cetera. And that stuff is starting to come to market now. So we think we'll have that in the water supply, for example, in FY '14 and that independent of the macro situation, that would be helpful. And so we would expect to see a rebound in productivity in FY '14, and if that happens, as we get into FY '14, we'll start asking the question about capacity for FY '15. But at this point, we don't see a big capacity need to support our FY '14 outlook. Sterling P. Auty - JP Morgan Chase & Co, Research Division: And when you look at the potential for license growth reacceleration, when you look at the pipeline, what is it that's going to lead you out? Is it going to be the PLM side? Is it going to be further acceleration of SLM? Or do you think just once the economy starts to improve internationally, there will be a broad-based improvement?

Yes, I mean, I would characterize our pipeline across 4 of our 5 segments as being pretty good and that being exceptionally good in SLM. So, but, I just want to say, I think SLM could do relatively better than the others, but all of them look pretty promising in terms of the actual opportunities that are being worked in the pipeline.

Yun Kim from Janney Capital Markets.

You talked a little bit about the CAD business a little bit. But can you just go into a little more detail about the continued weakness you're seeing in that business? It's been down year-over-year for the past 6 quarters in a row. It seems to have decelerated again in this past quarter. Obviously, CAD business does have some negative streaks before, but I don't think it has ever shown 6 quarters of decline, for at least, not at least last 10 years. Is there something fundamentally different about this downward trend this time around versus previous down cycles in the CAD business? Is CAD business -- I mean, does that have a much bigger exposure to Europe and Asia than the other business? And a side note on the CAD, one of the key growth driver behind the Creo introduction was the ease of usability, which should have expanded your target market beyond engineers, how is that progressing? Or at least within -- not necessarily in terms of sales but from interest point of view.

Yes. Let me try to get the second part of the question because that provides a good context for the first part. So in our Creo product, as compared to our Pro/ENGINEER predecessor products, we have a lot of new capabilities, new modules, better usability through better user interface through better -- through this simpler direct modeling capability and so forth. We've said that in order to get to that capability, we need to take the base forward to this Creo version. It's hard to sell the new stuff in Creo to a customer who is still using Pro/ENGINEER. So we've been tracking our progress against upgrading the base to Creo. We've been projecting that by calendar year end, we expect to have 50% of the base on Creo. We are on target for that. There are some big customers, Caterpillar and John Deere-type customers that are going to upgrade between now and the end of the year. They'll drag with them their whole supply chains and so forth. So we think that, by the end of the year, we will be over the top of the hill in the sense that 50% or more of the base will be on Creo. And we've actually seen some promising data that says, once the customer upgrades to Creo, a majority of them loop back in a quarter or 2 and buy some of the new stuff. So we actually think that this product cycle is out there. And that's interesting because with the product cycle, we can sell more software to customers even if they're not hiring. But short of that product cycle, a lot of CAD growth is driven by seat count growth in an environment where nobody's hiring, there is no seat count growth. And I think if you look at Autodesk's performance, if you look a Dassault's performance, nobody's not going to cover up the ball with CAD growth right now and it really is because hiring has been a problem for the last 6 quarters you referred to. But if hiring picked up, that would be helpful but independent of that, as we get farther into this product cycle, we should have an upside opportunity that's not hiring-based.

Okay, thanks for that color. I think that helps a lot. And then, in terms of your CAD business, driven by the resellers today, how is that progressing versus prior trends and whether or not your Channel business is improving or not?

Yes, I think our Channel business, Jeff, was flattish.

It was up slightly. Both Direct and Channel were up in the quarter, very small amounts but it's not a trend. We've been holding our own in the channel.

Yes, so I think that, that picture is not materially different in the Channel. Of course, the Channel does tend to sell more new seats because they tend to sell the small and medium business, and you'll find some influx of new companies, startup companies and so forth buying their first-ever CAD seats. So generally speaking, there's a little bit of a different driver down in the SMB space but that too, has been under pressure for us and for our peers, our CAD peers over the last 6 quarters. So again, I would say, I don't think our performance there is markedly different than that of Autodesk or of Dassault, but you may have studied that closer than I.

Mark McMillan with Jefferies.

So, Jeff, on fiscal '14, it looks to me like the initial view is that you're going to achieve at least the same incremental operating margin increase, and maybe more, actually, if you to hit the high end of the non-GAAP earnings growth rate. So I wondered if you could just maybe help us with a couple of things. One is, where do you think the professional services gross margins could go? I'd be interested in your view on kind of -- you've done a great job expanding that, maybe next year or maybe ultimately, what you think the range there could be? And then when we think about the other area of leverage, is it mostly just, let's call it a very prudent approach on operating expenses?

So, Ross, I appreciate that. And obviously, to get to 10% to 20% EPS growth next year, we need to add more than 200 basis points. We really have to add 300 to 400 basis points in terms of operating margin expansion in the year. I'd say, and specifically to your professional services discussion, we've been tracking either on or ahead of all the metrics we put out there. We did 15 points this year -- this quarter, we'll do 14 for the year. We would be outlooking, I think, by 2015 that we get to 17% or better. And we would say longer term, we think that is kind of consistent with Jim's discussion, longer-term that can be pushing 20 points of margin. And so I think that piece continues to give us basically gross margin for that now move from 70% to 73% to 75% or above that. The other piece, as you described, is really, I think, we've had done a very good job on expense control and looking at continuing to leverage the operating expenses and I think the combination, again, of very good performance on the services business and on expense control can push us not only the benefit that we describe here for '14, but into '15 and beyond.

Yes, I think, Ross -- Jim, just to add little more color here. It will be good to paint a more accurate picture for you at an Analyst Day, like I said, I hope we have as well. But if you think about it, this year, we're in the 21% to 22% range. And if I -- if you go back to maybe we'll ultimately get to 28% to 29%, that said the 7-point's a margin before we feel like we've really optimized things. You might guess that, that would be front-end loaded because we can move more quickly now, particularly in an environment where the growth is less robust. We can move more quickly on margins. So perhaps in the short term, let's say next year, you'd have a story with a good chunk of margin expansion and a little bit of growth, and then maybe the year after that, it'd be a better balance of growth and margin expansion as the economy gets a little better, and maybe in the years after that, we'd be returning to what we feel like is a more normal growth rate in a good economy. But if you follow that math, that says there could be 4 good years of EPS growth ahead of us. That's really what I meant by superior growth. We could continue to deliver growth that was markedly better than other software firms, we believe, for a number of years to come.

That's great. That's really helpful. Maybe just 2 quick follow-ups, one for Jeff. Just on the debt side, you're getting close again to sort of net debt neutral position. You're paying down your debt. You did $40 million, I think, this quarter. As you get to this position, like, how are you balancing either debt paydown versus other uses of cash, such as stock buyback? How should we think about that progress?

Okay, great question. One of the good news, obviously, is we expand margins, we also add and extend cash flow so that gives us a lot more flexibility. For the year '13, we began the year with a view that we pay down debt of $100 million to the $120 million will be at the high-end of that range. We indicated share repurchase of $55 million to $75 million, we'll be at the high end of that range. So I think it continues to give us more flexibility, as we just described, we'll both repurchase stock in the fourth quarter and pay down additional debt, and that cycle continues. So I think what we're doing this year is actually purchasing -- repurchasing more shares in '14 than we did in '13. And I think I'm not committing to the future, but we continue to have more flexibility and particularly as we pay down the debt, that gives us more flexibility on perhaps share repurchase. I think we've been very disciplined also on M&A, and we'll continue to do that. I think we cited the Servigistics acquisition as an example that we closed at the beginning of the year that has been a very meaningful, strategic decision, but also a very, I think from a financial standpoint, that's performed very well. So we'll continue to, I think look at those balances and all the acquisitions. M&A activity is really driven by the strategic framework, as Jim has articulated it.

Last one for me. Just on that, what sounds like a really good SLM win it Renault, and you mentioned that the structure meant that no revenue was taken. I was just curious, is that a function of the contractual arrangement? Or are there future deliverables that need to be fulfilled and so it's more a delay on how revenue can be taken as a result of future deliverables being required?

It's because of the size and scale of it. We would look -- this is really accounted for under contract accounting, percent complete. And we did recognize some services revenue in the quarter. It was a small, a relatively small number, but we would have that. It would really look as a ratable deal to us over time. So over the next multiple years, it's similar to the way we're looking at Caterpillar, because it's a similar kind of model that would be a large, really opportunity and win upfront and then recognizing revenue ratably as we deliver on a percent-complete basis.

And is that something that you anticipate will apply to most of the large deals and/or is that something you are deliberately pursuing?

Yes. We will have a few of these, let me put it in that context. And I think it really is what a function of what the customer requires. If they require a larger program like this, we get into a place we'll say really contract accounting is appropriate. I think it is the exception, not the majority of our business.

Yes, Ross. It's Jim here. I might say the sales team fought like crazy not to let that happen. So certainly that's not any over strategy of the company, but as these deals get bigger and more complex, the accounts step in and say, I don't think you have the SOE type of evidence to support an unbundling of that transaction, so let's take it all ratably.

Matt Williams with Evercore Partners.

I just wanted to, I guess, dig into 2 sort of product areas and get, try and get a little bit more color on what you're seeing there. Obviously, a good quarter, again, in Servigistics, and the year obviously, the expectations look higher than what you initially thought. But I guess, underlying that, the organic sort of SLM business has been a little bit weaker. So I'm just curious if you could provide a little color on some of the dynamics there and how we should think about the relationship between Servigistics and some of your core SLM offerings going forward?

Yes, Matt, first of all, good morning. That's a very interesting question, because you may remember when we acquired Servigistics, we were very clear that we were going to move to integrate it quickly. And as a consequence of that, the PTC sales force quickly jumped into the game and started running Servigistics' campaigns. And so some amount -- and the distinction between organic and Servigistics that we're talking about here on this call, is completely lost on a sales guy, who is just trying to win a deal. And so some amount of the upside in Servigistics is driven by the PTC sales force who are running these campaigns as an entry point, planning to drag the organic stuff in later, but it's very difficult for us to sort of separate the 2 and say that 1/2 is doing better than the other 1/2, because, in fact, it's executed as a bundle. So for us, it's more meaningful really in terms of our operations to think about how is the bundle doing. So that's my view of the situation.

Okay, that's helpful. And then, the other area I was interested in is this the ALM business. And I know back in June, we talked about that they're fairly complex sales and that the sales cycles could be a little bit longer there. So just curious as to what you're seeing, sort of around the pipeline build in ALM and how the sales cycles are performing in that business? And then, I guess beyond that, sort of how you're continuing to think about the cross-sell opportunity for ALM into the existing PLM base?

Yes. I think when we look at our data for ALM both historical performance and pipeline going forward, it looks a lot like PLM. The business is not doing relatively worse than PLM. It's actually maybe doing a notch better than our PLM business. And when we look at the pipeline going forward, it's a pretty good-looking pipeline as is PLM. So I think that, that actually says, there is a fair amount of cross-sell, and we're selling the same kinds of stuff to the same kinds of customers. And whatever reasons they might use the delay our PLM purchase are the same reasons I would use to delay our downsize an ALM purchase. So I think our view is, it's been a good acquisition. It's performed relatively well, and the pipeline looks relatively good going forward. So the premise, if you will, of the acquisition feels completely intact to us.

Jay Vleeschhouwer for Greg Griffin Securities.

Jim, I'd like to follow up on the earlier line of questioning about your CAD business, particularly your CAD support revenues, which of course, grow your largest single-line item of revenue. Your active CAD seat count grew sequentially in the prior quarter, according to your prepared remarks. But there's now been 3 sequential quarters of decline in CAD support revenue. Could you talk about the influences inside that number in terms of flow-through of prior weakness in new CAD ASPs or currency or perhaps even mix? And how are you thinking about that number in the context review of fiscal '14 guidance, then 1 or 2 follow-ups.

Yes. Jeff, you might have to help me out here. I'm looking at -- the data I'm looking says that our CAD maintenance, or what we now call support revenue, was essentially flat year-over-year.

I'd say, if you look at this, the 2 areas that have been impacted in terms of the reported dollars, I mean, I think you cited the CAD seats have performed well. If you -- and I'd want to get back to you with constant currency data, because we do have a significant headwind particularly in Japan, as an example, where the yen is off close to 20%. And that's a big support business for CAD. So there's been a headwind, clear headwind on currency for both the quarter and the year. And overall, the seats are up. So I would say that's a piece of the puzzle. I don't have all the data in front of me, we could follow-up with that.

Yes, I'm looking at a little bit more data here that might be helpful. So on a constant currency basis, our maintenance revenue was up about 1%. Our seat count was up in part because of some large deals, but our license revenue was down, as we've discussed earlier. So I think that in general, license revenue is challenged, maintenance revenue has been holding up pretty well. We've probably, for example, in this order in Japan booked a large seat count, which help seats our maintenance.

I think it will be forward-looking maintenance we have recognition as well. So I'd make one -- just a broad comment, just to maybe take it up a level, Jay. If look at an area of strength and really over performance in the quarter, it was the support business. We continue to, I think, deliver very well against the goals and guidance. And in particular, it's attached rates are 99-plus percent, renewal rates continue to be very strong. So I would just want to make sure that we understand, we understand the how critical, that's 52% of our revenue in the quarter. And I think when you drill into all of those metrics, while there's all these things you could do to make it better, I think that piece of the business is well guided and been performing very well. So I want to make sure we have that context.

And, Jay, you asked the question about next year. In terms of FY '14, again, we just gave you some color. But within that color, we would expect the maintenance growth rate to be at or maybe slightly better than the company growth rate in FY '14.

Okay. Now, to give a somewhat longer-term look. At the conference in Anaheim last month, and some of the management presentations, we heard you speak about your, more or less, having settled into an 18 to 24-month product release schedule for Creo, for example, and for Windchill, which is somewhat different from what your competitors do. But the question for you is, if at some point you did in fact want to move to a more ratable model, somewhat follow-up-ing on Ross' point earlier, at least the Windchill, do you need to have a more rapid release schedule roughly every year or so, to underpin that kind of a ratable or subscription model for at least some of the product lines?

Yes, I mean, you're asking how would we react to a strategy to go to a ratable model, but we haven't actually haven't declared a strategy to go to a ratable model, so it's hard to answer that question.

Okay. And referring back to the comments you made earlier about Renault, you included Caterpillar or your experience of Cat in that answer. But when you look back at what happened in 2011, early 2012, with the Cat business for SLM, there were 2 or 3 quarters of pretty substantial upsides to revenues and then a pretty sharp falloff thereafter. So when you say ratable in the context of Renault, do you mean actually even levels of revenue over some period of quarters? Or do you think the experience might be the same with a spike for a couple of quarters and then a falloff?

So let me just say that the way we look at the timing it's a percent complete. So if we deliver more in a particular activity or in a particular timeframe with more resource on it, we'll recognize more revenue. So this will ebb-and-flow over time. It's not what I'll call direct linear, where you say it's a 24-month project and you divide by 24. It's going to be based on the work completed and the hours put in against the estimate to complete. So it will move around a little bit, but I think fundamentally, to think about a big win like Caterpillar, most of the revenue rec is ahead of us in both Renault and Caterpillar kinds of deals. They were big wins and they represent kind of annuity streams that we'll recognize over the next several years. So I can't probably be any more specific.

I might feel that I think I know what you see. So let me respond to that. In the case of Caterpillar, we did multiple back-to-back contracts. Some of those first contracts had revenue rec upfront and then the really, it was the third contract that we went ratable on. So at that point, you stop really seeing meaningful license revenue even though you might have seen some earlier. There's been a steady diet of services revenue coming out of the Caterpillar projects, right? So Renault, if we were to break that out in our reporting, for the next number of quarters we'll look like a good chunk of services revenue and probably a little bit of license revenue, but you're never going to see a big pop in license revenue coming out of this Renault contract, even though it does contain license revenue.

Okay, I think we got time for one more caller.

Richard Davis with Canaccord.

Have you seen any pricing pressure at all on your support pricing at all? Some companies have, some companies haven't. I was just wondering.

No, we're not really seeing any pricing pressure. In fact, we'll probably see a pricing opportunity. Our renewal metrics are high. Our attach metrics are high. We feel like there's opportunities probably around pricing, there's opportunities around discounting, et cetera. So our maintenance or support business, as we call it, is full speed ahead. Okay, I think that wraps up this morning's call. We'd like to thank everybody for their questions and their support, and we look forward to speaking with you.

As we're saying, we look forward to speaking with you with our next earnings call and then probably shortly thereafter, an Investor Day and then we'll get back to you on dates for that.

Yes. I was just trying to tell Kristian I want an opportunity to thank you, all, and thank you for your time here this morning, I appreciate that. And for your support and all the great questions. I'm always impressed by how insightful you guys are to the things that make our business stick. So I appreciate that and I appreciate your time. Thanks a lot, and we'll talk to you again soon. Bye-bye.

This concludes today's conference call. You may disconnect at this time.