Good afternoon, ladies and gentlemen. Thank you for standing-by and welcome to the PTC’s 2015 Second Quarter Conference Call. During today’s presentations all parties will be on a listen-only mode. Following the presentation the conference will be open for the questions, [Operator instruction]. This call is been recorded. If you have any objections you may disconnect at this point. I would now like to turn the call over to Tim Fox, PTC’s Vice President of Investor Relation. Sir, please go ahead.

Thank you, Tory. Good afternoon and welcome to PTC’s 2015 Second Quarter Conference Call. On the call today are Jim Heppelmann, Chief Executive Officer; Andrew Million, Chief Financial Officer; and Barry Cohen, EVP of Strategy. Today’s conference call is been broadcast live to an audio webcast and the replay of the call will be available later today at www.ptc.com. During this call, PTC will make forward-looking statements including guidance such to future operating results because such statements deal with future events actual results may differ materially from those projected in the forward-looking statement. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in PTC’s annual report on Form-10K, Form-10Q and other filings with the U.S. Securities and Exchange Commission as well as in today’s press release. The forward-looking statements including guidance provided during this call are valid only as of today’s date, April 29, 2015 and PTC assumes no obligation to publically update these forward-looking statements. During the call, PTC will discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with general accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most comparable GAAP measures can be found in today’s press release made available on our website. With that, I’d like to turn the call over to PTC’s Chief Executive Officer, Jim Heppelmann.

Great, thank you, Tim. Good afternoon everyone and thank you for joining us here on the call for the review of our second quarter 2015 results. We’ve changed some aspects of our earnings release process this quarter in an effort to better meet units and I hope you’ll appreciate this new approach. Also given the complexity that currency and subscription transition have introduced this quarter, our remarks are probably longer today that we would intend to do in the future. Overall our Q2 results demonstrated solid execution across the business despite the very tough currency environment and somewhat uncertain macro economic conditions. Revenue was above the midpoint of our guidance range and we delivered EPS above the high end of our guidance range which reflects our continued commitment to driving margin expansion and our earnings growth. Once again, this quarter results were better than the headlines would suggest given the combined effects that foreign currency, our license model transition and our strategy to shift our professional services growth towards the partner ecosystem have on our announced results. If you normalize for foreign exchange rates and for subscription mix than on an apples to apples basis our year-over-year license revenue would have grown 8% and our software revenue would have grown 10%. With our professional services results included, total revenue grew 5%, operating income grew 14% and earnings per share grew more than 20%. These results are very consistent with the performance since you have been seeing from PTC for some time now. While the ApEx headwind, our business model and the professional services strategy make a headline to results appear less attractive, we know the shareholders appreciate the longer term positive effects of the license transition and the services strategy. Then consistent with the commitment I made 90 days ago,…

Thanks, Jim and good afternoon everyone. Please not that I’ll be discussing non-GAAP results unless otherwise specified. Total second quarter revenue of 315 million was down 13 million year-over-year driven entirely by lower professional services revenue consistent with our strategy. After adjusting for currency total revenue increased 4% year-over-year and when further adjusted for subscription mix revenue would have grown 5% year-over-year. On a reported basis, software revenue which consists on license subscription and support was flat year-over-year. However, after adjusting for currency we delivered strong software performance with 8% growth. Further adjusting for license mix, software revenue would have grown 10%. Our strong software revenue performance was driven by support which was above our guidance and would have been up 10% year-over-year on a currency and mix adjusted basis. This was partially offset by license revenue that was slightly below the midpoint of guidance but would have been up 8% year-over-year on a currency and mix adjusted basis. As Jim noted earlier in his opening remarks, we faced the tough Q2 2014 license comparison a quarter which we had 17 large deals including 3 mega deals. We also believe some of the Q2 2015 large deal softness could be related to potential economic and certainty. Especially in the America but also in the Europe, we saw deal sizes compressed in some chases deals were delayed. Approximately 59% in Q2 2015 revenue came from recurring business up from 52% a year ago reflecting growth in subscription and support. Clearly the growth in our recurring revenue represents a very positive trend in our business. Turning now to our subscription licensing model, our subscription offering has been available for two quarters and we are pleased with the early indicators. We currently have underway a companywide imitative which we call subscription phase 2.…

Thank you. We will now begin question-and-answer session. [Operator Instructions] our first question comes from the line of Mr. Sterling Auty from JP Morgan. Your line is now open.

Thanks very much and Andy welcome to the team. One question, one follow-up. Jim, On the IoT side when you look at the 62 logos that you brought in, what I’m curious about is what does the IoT stack look like for those companies meaning what portion of the IoT solution are you putting to the table and what commonly are you kind of connect in your meaning is a broad comp ships being provision by just for a wireless or synchronize and then you are getting the data feeds. What does the total solution look like as much as you can say most common architecture within these companies?

I think if I were to generalize it, what we are selling to you now is the software that a little modular software they will go into the product. So assuming the product has a weird or a Wi-Fi or cellular ability to connect and they need the piece of software they carry on the conversation with the cloud so we are selling that little module that goes into the product. he so called edge agent and then we’re selling the cloud piece that the edge agent talks to so the cloud, the database, the capacity that it receives his data and carry on the conversation from the cloud end and then we are selling the application enable that platform which is the plumbing to both build and run applications on their cloud talking by directionally with that product. So we are actually selling quite a bit of technology stack. Now in terms of what is that product have been turned inside it already in terms of hardware and software. Well, I sell over the map from products that had the ability to connect, but didn’t know what to connect to, in some cases people who are slapping a raspberry pie and no pie could never had the ability to connect and giving the ability to connect. So it varies a lot in terms of what’s inside the product. But our solution to go from product to cloud and then to build and then to run applications against that product is fairly consistent. So of course it vary a little.

Okay and then separately when you talk about the uncertain economic environment. I guess we understand kind of the exporting in the dollar and euro exchanged. But when we look at some of the PMI’s coming out Europe, it feels like investors are more looking at possibility of recovery in Europe. So the time when you were talking about, just pushing this, is a little bit confusing. So maybe you can help kind of clarify that.

Yes, so Sterling my view is that Europe situation is okay and mostly stable to PMI data. I’m looking at it says just tick down a tiny bit from 52 in change the 51 in change in last month. I think the bigger difference and bigger risk for us is in the U.S. where the PMI has been pretty strong. But I think it’s coming down quickly, tick down much more and what we really saw was particularly in the month of March is customers panicking a little bit because they were looking at their own forecast and seeing what currency was doing their top line and their bottom line and they were sort of just slapping the breaks on everything. So we saw in particular the U.S. now I wouldn’t have characterized the U.S. economy is difficult, I don’t think I did on the previous earnings call. But I think to that currency swing was so far and so abrupt that it just let people kind of in a bit of a deer in the headlights or panic mode moment saying let’s just stop and try to figure out where this is going, maybe it will stabilize and we go back to business as usual that would nice, maybe it won’t. So I think we’ve just tried to hedge a little bit saying there probably is a situation here and we’re the average U.S. based global company now has a different looking set of guys in front of their investors and they are trying to figure out what to do about it much as we were.

Thank you. [Operator Instructions]. Our next question comes from the line of Mr. Matthew Hedberg from RBC Capital Markets. You may now proceed.

I know you talked about the move to subscription revenue still early and again you indicated in the prepared remarks that you might consider a more rapid transition. I’m wondering, does this imply a scenario where license revenue wouldn’t be an option at all in the future?

Well I think our program is right now is to figure out what that end-state is so we’re looking at customer segment both size of customer the markets that are in and also by product segment to really figure out where the what offering makes sense for each customer and then we’re going to design the offering differentiating the pricing the win they take and frankly the feature sets that are offered there. And so we’re going into with an open mind but I think if you look at what’s happening broadly in software you see that there are so many market segments and customer segments it is the preferred way to buy and it continues to move in that direction, so we’re doing a number of marketing and pricing studies now to come up with that end state and I would expect that we’ll tell you more as we kind of complete these studies over the next few months and then our goal is to actually launch new offerings at the start of next fiscal year.

That’s great, thanks Andy. And then I’m curious if you could give us a sense for what percentage of your subscription bookings were some core CAD PLM this quarter versus maybe the past several quarters?

Yes the IoT business remains primarily subscription. We saw some of the core business go subscription, but it was actually less than last quarter. There’s variability in these early stages as we look at the pipeline next quarter we’re seeing a little bit more those subscription, but I think at this stage there’s variability and frankly I think we can the reason we’re doing work on really the packaging aspect of it is so that we really have very differentiated offerings. Those people who care about could be total cost of the product over say four year to five year timeframe will want a different offering and that person is trying to optimize it over 10 years. The one who wants more flexibility to ramp and exchange product exchange fees will probably prefer subscription and so that’s really what we’re assessing at this point in time and then have to have truly a two distinct and different offerings [indiscernible].

Maybe I could squeeze one last one in here. I’m curious, what percentage of your [LNSS] bookings came from large deals? I think last quarter was maybe 32%, I think the year before was maybe 42% and I think in the prepared remarks you talked about in line with your historic average. I’m curious, what historic average are you using there for that assumption?

It’s somewhere in the 30s. Yes, it’s basically somewhere in the 30s. It was clearly a little bit less this time because of the fact that we only have 13 of them.

Thank you. Our next question comes from the line of Mr. Steve Koenig of Wedbush Securities. Sir, your line is now open, kindly proceed.

I’ve got a few questions that are all pretty historic hopefully. One is, can you all disclose so that we can do in our genetic calculation the revenue contribution from [indiscernible] which I don’t believe were present a year ago?

Yes what I can share with you there organically the constant currency mix adjusted business grew just above the mid-single-digits as oppose to the 9% of the total. We’re only going to disclose revenue contribution from acquisitions if they materially serve with our results but it was just above the mid-single-digits in the 6% range this quarter.

6% okay, so Andy on that number since the mix a lot of that mix is from the new business [indiscernible]. Can you possibly disclose just the constant currency adjusted organic contribution?

I don’t have that number in front of me. Yes, sorry.

Let’s see, can you tell us last quarter you told us a very useful statistic which was the [LNSS] bookings per sales and marketing spend was part of your prepared remarks you wouldn’t happen to have that again this quarter, would you?

It was up 7% and it’s in the prepared remarks I believe. 1.12 and up 7% year-over-year, yes.

Okay, I failed my Evelyn [indiscernible] so.

That’s the downside of the new process Steve.

That’s okay, we’ll get used to it. Just couple of quick ones and couple of more. Do you believe you’re still on track to achieve 40 million to 50 million in IoT revenue and subscription booking?

Yes and we haven’t changed that guidance. We didn’t mention it in this particular script but yes that would correct. That remains our guidance there.

Okay and the Nugget deal in Japan, what product areas was that in? [Indiscernible]

Probably majority KI minority POM might a bit some other stuff in there.

And did you say what vertical that was?

No, we didn’t.

Little more strategic here, can you talk a little bit about progress integrating SOM with the IoT technology and when the application integrations will be available as that kind of turnkey solution for [indiscernible]?

Yes, I mean let me say we’ll have some big announcements on this front next week and I hate kind of scooped here in the call. But we are making good progress and it’s quite exciting and we are making some interesting progress with partners in that area too. Other companies who might like similar strategies.

Thank you. [Operator Instructions] our next question comes from the line of Saket Kalia from Barclays Capital. Your line is now open. Kindly proceed.

Thanks for taking my questions and welcome Andy. So first on the services business, Andy, how much of that is now consulting [Audio Gap]?

If you look at our IoT business there is almost no consulting in that business. So we kind of like the idea of moving to a business that’s either rich in subscription or rich in software. How are we going to measure it, but really focused on software with that would give us a path to much higher margins than we’ve been talking to you about year-to-date.

The other positive thing that’s also driving the lower professional services, numbers going forward as we’ve got more of these BRD’s speaking more of these basically out of the box solutions consulting offerings. So that they from the customers are bringing their products at much faster, with much smaller engagements that they have in the past. So that’s the positive for them and positive for us their higher margin as well.

Got it, that makes sense and then for my follow up. Jim, outside of IoT we are a subscription pricing resonating most in your customer basis and with the particular vertical our particular product maybe SNV versus large. Just any color on sort of where those preliminary marketing studies are showing subscription being successful offering.

We are one quarter into the offering of subscription into the S&P space and we did do a number of transactions there and I think it’s interesting to that space because a lot of those S&P companies are let’s say cash challenged and this gives them [indiscernible] commit all the cash up front, then I think if you go into the bigger accounts to be frank it’s probably not I’m not sure there is a strong association to a vertical or geography. I think it’s really more to a financial strategy of the customer. Some customers don’t like capital commitments and they rather buy everything on the OpEx basis and so forth. So I think it’s really down more to the financial strategy of the company that whether they are automotive industrial or retail.

Thank you. Our next question comes from the line of Mr. Matt Williams from Evercore. Your line is now open. Please proceed.

Thanks very much and thanks for taking the question guys and welcome Andy. Just I’m curious with IoT getting as much attention as it is, from a budgeting standpoint with the customers that you are talking too. Are they trying carve out budget for IoT from existing budget or you starting to see instances where there sort of setting that aside and dedicate it your allocated dedicated resources towards trying to build out an IoT strategy and I guess just putting color on how they thinking about that from a budgeting stand point.

Yes, I think the thing involved it very differently Matt from how they will think about CAD and PLM, CAD and PLM Mark somewhat mature markets and budgets are set well in advance and tend to have some kind of a cyclical effect tied to PMIs or macroeconomic or whatever. I think this IoT discussion is completely different than that. This is a very strategic initiative. The CEOs are involved. It’s a corner office topic to doing it for strategic reasons they would cut other budgets to make room for if they have to, but I think it’s that double effect and interesting little story from this past quarter Professor Porter and I held a event around the HBR article in Chicago and it was co-sponsored by the NAM the National Association of Manufacturers who was eager to be associated with the topic and they actually had asked us, could we co-sponsor that event because quite frankly we were going to do it anyway. And we said sure, but can you help us with audience acquisition and they said we’d love to. So this was an event where we targeted 75 CXOs with an emphasis on CEOs as the registration started coming in at a 120, we had to say I’m sorry there’s just no room in the room. We made the PTC people and the NAM people stand against the wall at the edge of the room, so all the customers could take every last spot at the tables in the theatre room and that was that. So I’m just saying it just kind of shows the level of interest here. I’ve never seen a topic in my time at PTC that so quickly was something that would get you to the corner office and in a very strategic conversation. So I don’t think we’re drawing from the CAD and PLM budget I think we’re onto something that’s acyclical because of how strategic it is.

And maybe just one quick follow up on the SLM business obviously a little bit results there and you guys have talked in the past that the pipeline seems to be there and there’s sort of in a mix of some execution and deals cycles elongating a little bit. So, could you give any update around the SLM I guess pipeline number one? And then, what you’re seeing in terms of deal cycles, is it shortening at all and just a general update there?

Yes I think we’ve sort of framed up at our SLM sales cycle. These are enterprise initiatives -- sold top-down and consulted it way around business process transformation and those are never short sales processes. So I would put them in four to six kind of quarter range, so just to remind you of what the story we’ve been sharing with you over the past few quarters is in 2013 we didn’t have a dedicated selling organization for SLM and we felt like we didn’t have enough attention on it and the pipeline got a little soft because we didn’t have enough expertise enough focus. In 2014, we put on a dedicated sales force, but we said it will take some time to build up the pipeline and to run these deals through the cycle and if you look at four, six, seven whatever quarter of sales processes that means it should start to show up in the back half of 2015. So the pipeline does look quite robust now. We feel good about that. We did see a better result here in the past quarter. Like I said I don’t think we want to declare victory on that yet one quarter doesn’t make a trend, but that quarter is consistent with the trend we would expect to see based on the actions we’ve taken in the pipeline that we’ve developed.

Thank you. Our next question comes from the line of Mr. Jay Vleeschhouwer of Griffin Securities. Sir, your line is now open, kindly proceed.

This is Gavin [ph] in for Jay. Wanted to start on the press release about the restructuring and expense reductions where you referred to assessing pricing and packaging practices. Did you mean something short term such as raising local non U.S. prices to offset currency? Or did you mean something more substantial and longer term than that?

We’re basically assessing our pricing and these studies we’re doing relative to the perpetual and subscription offering and the feature offerings as well kind of come up with the good, better, best type of strategy for various products for example so that’s pricing strategic you don’t want to just do a quick kneejerk reaction to something going on in the market we compete against German companies frankly who have much less U.S. based business than we do. So they’re actually seeing – as you saw some of our competitors that their reported results are higher than the constant currency results, so kind of the inverse of us. So we’re doing it from a more strategic perspective.

Yes and I can say one of the great things as Andy has got a lot of experience here. So it’s great to have them on the team, because he is one of these guys are come into the office filled with great ideas and lots of execution energy and so forth. So we’re off executing vigorously subscription Phase II and strategic pricing and things like that. I think we always wanted to do and now we got the talent to do it.

Okay, good. And under what circumstances would you for see increasing the expected or target proportion of subscription licenses to say 25% or more?

Basically it’s going to drive greater overall value to us from the customers. I mean, we’ll going to get more revenue from the customer, because that’s more valuable offering to the customer and that we’re going to drive there.

Yes I just, if I could add here. When we launched into this program at the beginning of the year. We said, we want to run this for a year without trying to steer it. So that we can here the voice of the customer and then we want to steer it. So when Andy talks about subscription Phase II, he means grabbing the controls and steering this to some destination that we think is the right destination so that we move through this process and there is an end to it. So that’s really what we’re talking about, we’re collecting data and beginning now to say okay, what is the data telling us and what’s the destination and how quick can we get there. So that we kind of come through the valley of the transformation and come out the other side with the benefits. So that’s what we’re working on.

Understood. Is this feasible to reinvest in most, if not all of the expense savings from the restructuring layoffs back into the IoT business?

I mean, in gross terms we reinvested half. So we took some money output and put half back in and other half fell to the bottom-line. Is it feasible, I mean could we spend more money, let me tell you we’ve spend a lot money. I mean I don’t know that we need to spend any more money, I will tell you, we’re playing to win and when somebody has good idea and a good initiative or if we see for a need for sales capacity we’re funding it. So there is nobody going hungry here in the IoT business, we’re trying not to be cavalier but we’re playing to win and we do intend to win in this business. And I think quite frankly the data suggest and the analysts are starting to suggest that we are winning.

Okay, great. And lastly in terms of cash flow. What is your estimated FY ’15 operating cash flow and is a possible that your FY ’16 cash flow can return to fiscal ’14 levels or more?

Okay. So I’m going to guide FY ’16 today. FY ’15 here it tends to follow non-GAAP pre-tax earnings, we do have two unusual items that we disclosed and it is in the prepared remarks. One is the computer vision, pension that is closing out this year, we don’t have a final estimate on the amount, but it’s roughly 45 million and the others of course the restructuring, which is in that 40 million range.

Thank you. [Operator Instructions].

Okay. Can I assume there is anybody else in the queue because it’s been more than an hour now and just to be respectable over an everybody’s time. If there is no other questions we should probably thank you all for participating. And we look forward to talking with you again in the next 90 days and hopefully we’ll have good solid report for you then as well. Thank you.

Thank you. And that conclude today’s conference. Thank you all for joining. You may now disconnect.