Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the PTC 2016 Third Quarter Conference Call. During today's presentation, all parties will be on listen-only mode. Following the presentation, the conference will be open for questions. I would now like to turn the call over to Tim Fox, PTC's Vice President of Investor Relations. Please go ahead.

Thank you, Chris, and welcome to PTC's 2016 third quarter conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the call will be open for questions. Today on the call, we have Jim Heppelmann, Chief Executive Officer; Andrew Miller, Chief Financial Officer; and Barry Cohen, EVP of Strategy. Today's conference call is being broadcast live through an audio webcast, and a replay of the call will be available later today on our Investor Relations website. During this call, PTC will make forward-looking statements including guidance as to future operating results. Because such statements deal with future events, actual results may differ materially from those projected in the forward-looking statements. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found on PTC's Annual Report on Form 10-K, Form 10-Q 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 today, July 20, 2016. PTC assumes no obligation to update these forward-looking statements. During the call, PTC will discuss non-GAAP financial measures, and all measures discussed are non-GAAP unless otherwise noted. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most direct comparable measures can be found in today's press release, made available on our website. With that, I'll turn the call over to PTC's CEO, Jim Heppelmann. James E. Heppelmann - President, Chief Executive Officer & Director: Thanks, Tim. Good afternoon, everyone, and thank you for joining us. Let me begin with a brief review of the third quarter. Q3 was another strong quarter as we executed well across our key operating…

[Operator instruction] Thank you. Our first question comes from Matt Hedberg, RBC Capital Markets. Your line is now open. James E. Heppelmann - President, Chief Executive Officer & Director: Hello, Matt.

Hey, guys. Congrats. Well done this quarter. It's great to see the momentum here. One point on the guidance and I know, Andy, you talked about increased -potentially some macro uncertainty out there. I believe you just beat your license subscription bookings metrics by about $10 million this quarter. I think you raised the full year by $8 million. Is the delta there more of that uncertainty, or is it potentially more license revenue in Q4? Just maybe little bit of color on that. Andrew D. Miller - Chief Financial Officer & Executive Vice President: It's really the timing. We based – our view of Q4 didn't really change from our view of Q4 last quarter, small amount of bookings that moved from Q4 into Q3. So the over-performance for the full year is very much based upon strong performance in Q3. But we also felt strong enough about our forecast for the fourth quarter that we pulled the bottom end of the range substantially.

Got it. That's helpful. And then, Jim, at LiveWorx, one of the things that I think we get asked from a lot of investors is the CAD base. Is there innovation coming, stabilization in that base? And there's talk about a cloud version of Creo or CAD, talk a little bit more about the expectations about the timing of that, and maybe how feature-rich that is versus an on-prem offering? James E. Heppelmann - President, Chief Executive Officer & Director: Yeah, I think the cloud-based CAD will come in some phases. Some early phases involve repositioning the product largely in its current form but served through a cloud SaaS model. And then subsequent to that, we're likely to go into some deeper phases where we do more fulsome remodeling of the architecture to fully optimize it for the cloud. So I think you're going to see us take some steps that allow somebody to purchase Creo, sort of, as it now in a cloud SaaS model. And then I think you'll see the product evolve from there in more significant ways that represents something a little bit more to re-think. But that will be an option. We're not going to take it off the market in its current form. We got a lot of customers who quite frankly use it on-premise and like it that way. So this for us will be an optional way to deliver the power of Creo.

So, you see it as more incremental to the base rather than potentially a cannibalistic product? James E. Heppelmann - President, Chief Executive Officer & Director: Yeah, yeah. We're definitely not trying to flip the base to cloud. If some of them want to go there, absolutely. I think what we see is an incremental opportunity to do a better job participating in the low end with different pricing schemes, different delivery schemes, quite frankly, digital marketing schemes, things like that, that have kind of not really been in our playbook here today. So I think this means we run the CAD business as we know it and we'd pursue an incremental opportunity enabled by a different technological delivery and go-to-market model.

Great. Thanks a lot, guys.

Our next question comes from Saket Kalia. Your line is now open. James E. Heppelmann - President, Chief Executive Officer & Director: Hello, Saket.

Hey. Good afternoon, guys. And thanks for taking my questions. First one for Andy. Andy, another nice quarter in terms of growth in the subscription mix. The guide for next quarter is for that mix to go down which, I guess, implies a higher pipeline of perpetual contracts. Could just maybe talk about the likelihood that some of those might opt for subscription instead. Presumably these are – in the fourth quarter, some of these are coming from larger customers. What has that conversation been like as larger customers kind of think about perpetual versus subscription? Andrew D. Miller - Chief Financial Officer & Executive Vice President: So, clearly, the sales force will try to move them from perpetual to subscription. Some of those large customers have CapEx budgets, they've already planned it this way, and it may not be possible; others, we've been successful. We based our guidance on what we see in the pipeline as we start the quarter and so that's basically our assumption. And of course Q4 typically has the greatest number of large deals. And so the fact that more would be perpetual certainly is a reasonable outcome despite how hard we push, given the fact our large customers really may not have had time to adjust how they can buy during this particular cycle. The one thing that I'm happy to share is that the large deals we had last quarter in Q3, we had a big uptick on that compared to a year ago, three-fourths of them ended up going subscription. James E. Heppelmann - President, Chief Executive Officer & Director: And Saket, I might just add for some color here. I kind of remember having similar conversations 90 days and 180 days ago. But the thing to remember is that our sales…

Sure. Makes sense. And for my follow-up, maybe more for you, Jim. Jim, could you just maybe talk about some of the market development that you've done around IoT around the freemium model and maybe embedding some of that capability into Windchill 11? I guess maybe more specifically, what tools are customers getting a taste of through that freemium model or through Version 11? And then what's the carrot that you can offer them to use ThingWorx in a bigger way? James E. Heppelmann - President, Chief Executive Officer & Director: Yes. Well, on the market development side, we now have a combination. We have a freemium developer site where you can gain access to ThingWorx, download ThingWorx, start creating some apps, try it out in a freemium model. You can do the same with Kepware and you can do the same with Vuforia. These are three different experiences, but then they're cross-linked like, if you like one, well, then you could link over here and try this complimentary NICs (34:44) capability that links to it and that'd be great. That really went live right around the time of LiveWorx, but the adoption is great and I think in some places, like Vuforia it's off the charts. I think since LiveWorx, we probably added 40,000 more developers to the Vuforia site. It's really unbelievable and the interest level in AR is sky high and we really have something special there. So, I think, the freemium thing is really the way that people want to investigate new technologies. They don't really want a sales call. They want to play with the technology and try building something and gain their own experience, and see how good it is, how strong it is. And if they like it, yeah, then maybe they'll take…

Great. Very helpful. Thanks, guys.

Our next question comes from Steve Koenig. Your line is now open.

Thanks a lot, gentlemen. One for Andy here and one for Jim. First for Andy, let's see. Andy, did you comment or did I maybe miss some commentary in the prepared remarks about percentage of large deals in the quarter? I saw that you expect that to be at the lower end of the range going forward. But how were they for the quarter. Can you help characterize that? Andrew D. Miller - Chief Financial Officer & Executive Vice President: Large deals were reasonably strong for the quarter at the higher end if you compare it to prior PTC quarters. So it was, we said previously 30% to 50% of our bookings come from large deals. It was near the higher end of that, not quite 50% but near the higher end of that. James E. Heppelmann - President, Chief Executive Officer & Director: This was generally a good large deal quarter. Andrew D. Miller - Chief Financial Officer & Executive Vice President: Yeah. James E. Heppelmann - President, Chief Executive Officer & Director: Which hasn't been true kind of, of late. Andrew D. Miller - Chief Financial Officer & Executive Vice President: Yeah. And to be frank, we saw 31% constant currency bookings growth. We don't believe that is the ongoing growth profile for the business. That's the variability of having frankly a strong performance, lot of large deals, strong execution and frankly a compare against not necessarily really strong performance a year ago, as the economy suddenly weakened.

Yeah. Okay. I'll segue to my second question then. So this one is – starting with that, the big expansion deal you had with the consumer company in Q3 which was about using ThingWorx for a smart factory. Was this with a partner or was this direct and more generally maybe, Jim if you could just comment on – factory automation is starting to look like one of the lead horses for ThingWorx here in terms of the use cases. And it looks that you're getting more involved with that. You don't have historically a lot of experience with factory automation, but it looks like you'll be developing that and working with partners. Maybe, do you want to comment on the outlook for that use case in particular? James E. Heppelmann - President, Chief Executive Officer & Director: Yeah, I think it's a great question. I think if you look at some of the reports that have been written by the big thinkers, McKinsey and so forth, they almost all identified factory automation as one of the biggest of all IoT use cases. So number one, if you want to be a leader, you probably should play in that space. Now it turns out that the heritage of ThingWorx actually comes from that space, the guys who founded ThingWorx had previously founded a company called Lighthammer that they sold to SAP and it became the basis for SAP's manufacturing automation strategy. Before that, a couple of them had been key players in Wonderware, which now is owned by Schneider and so forth. So, there's a deep sort of heritage, if you will, in manufacturing automation in the product. And then of course, manufacturing automation is almost the sole heritage of Kepware. So, we have some technical jobs, but I think you're right. We feel like that's a domain that PTC has been on the edge of. We help people design products and then design the process by which they'll manufacture those products. But then when the factory starts, we're kind of done. We're doing manufacturing engineering, not manufacturing execution or manufacturing operations. So we don't have as much domain expertise. That's why we target at partners. So we're looking for some horses we can connect our cart to, and we have some good ones. GE, of course, being one. And so this deal was done through a partner. And they took a piece of the deal and there was still a pretty substantial piece left for us. So we think that this is a very exciting opportunity; one, a leader should play in and one that particularly when paired up with partners, we absolutely have a compelling solution and the right to play in. So we're going to go after it.

Sounds good. Thanks a lot, gentlemen. James E. Heppelmann - President, Chief Executive Officer & Director: Thank you.

Our next question comes from Sterling Auty. Your line is now open. James E. Heppelmann - President, Chief Executive Officer & Director: Hi, Sterling.

Hey, guys. So, you did a good job right from the beginning of the year kind of factoring in some of the macro uncertainty. You talked about that in the guidance. But I guess what I'm curious about is maybe give us some insight as to what you saw in the close rate and discussions near the end of the quarter and the beginning of this quarter around any Brexit impacts or other things on the macro side? Andrew D. Miller - Chief Financial Officer & Executive Vice President: So our close rates actually were a little higher than they've been in recent quarters this past quarter. And frankly, our sales pipeline supports the guidance that we've laid out for next quarter using all of our analytics around historical close rates which we look at by deal size, by segment, by geography, by almost any cut you could possibly imagine. And so at this point in time, we think we've been appropriately cautious of the broader macro environment and taking into account Brexit in the guidance that we've given. As I mentioned, we didn't see an impact, but clearly it hit like just in the final week and a half. So, you wouldn't expect companies would be able to react that quickly to it. We're watching it closely but frankly we think we've been appropriately prudent in our guidance. James E. Heppelmann - President, Chief Executive Officer & Director: Yeah, Sterling, Jim here, if I could add to that. Craig Hayman is a bit of a machine here and he has made some pretty powerful changes. Some people changes, a lot of process changes, a lot of attitudinal changes and we're just executing better. So I think the view of management at PTC is the economy is not better but we're doing a better job with the things we do control. We're closing deals better. We're pursuing deals better. So I just think there's a lot of improvements and execution. We're discounting less. A lot of things that are helping us on the execution side are probably offsetting a macro environment that is no better than we thought it would be.

Got it. And then on the IoT front, you mentioned the tough compare with the $9 million of perpetual deals last year. Can you give us a sense what was the subscription mix within the IoT business this year? And is there a way to think about the growth rate year-over-year if those $9 million worth of deals went subscription last year? James E. Heppelmann - President, Chief Executive Officer & Director: Well, I think we're generally talking about bookings growth. So whether they're subscription or perpetual, we generally would book them more or less the same. So it doesn't – but if you... Andrew D. Miller - Chief Financial Officer & Executive Vice President: You have to look at – given the size of that business – if you do $9.5 million in three deals in a single quarter... James E. Heppelmann - President, Chief Executive Officer & Director: Do you remember the total revenue of IoT revenue in the quarter, ballpark anyway? It was like, I don't know, mid teens. Andrew D. Miller - Chief Financial Officer & Executive Vice President: Yeah, yeah, yes. James E. Heppelmann - President, Chief Executive Officer & Director: So we're saying $9.5 million of mid-teens came from three deals and this year we were roughly flat. If you take those three deals away, which means this year we had actually many more deals of much smaller size which is a much healthier mix, it's going to make the quarter any old way, but it's a lot better to make a quarter on the backs of a broad set of small- and medium-sized deals than a couple of a grand slam home runs.

Agreed. But what percentage of the bookings in IoT was actually subscription this quarter? Andrew D. Miller - Chief Financial Officer & Executive Vice President: Let me look that up... James E. Heppelmann - President, Chief Executive Officer & Director: Yeah. We're still looking. Andrew D. Miller - Chief Financial Officer & Executive Vice President: Part of that is because you have...

It's Tim. Excluding Kepware, that business is largely subscription. James E. Heppelmann - President, Chief Executive Officer & Director: Right. So a year ago, we didn't have Kepware. But a year ago, a number of ThingWorx deals which we allowed to be sold perpetual at the time, so three of the biggest ThingWorx deals a year ago went perpetual. There's like apples, oranges and bananas here because now we have Kepware which is almost all perpetual, but if you set that aside, almost everything that's left is subscription. So it would be a big shift towards subscription in the pure ThingWorx sales year-over-year Andrew D. Miller - Chief Financial Officer & Executive Vice President: Right. So I'll give you the number. It was 62% but basically Kepware, of which we shared, was about $5 million of bookings, and I'll give you the year ago. Tim's pointing at the number, I have it in front of me – it was 62%, but about $5 million of our bookings were Kepware, which were all perpetual. So it's predominantly subscription. There was one large perpetual deal, but it was a fraction. It was between $1 million and $2 million, compared to $9.5 million a year ago. That put into perspective for the IoT business. It's predominantly subscription other than Kepware. And we'll actually doing pricing studies (46:38) on the Kepware business. James E. Heppelmann - President, Chief Executive Officer & Director: Yeah, yeah. Definitely, we'd like to see if we could take Kepware to subscription. At the mean time, we've only owned it for quarter and a half here. Andrew D. Miller - Chief Financial Officer & Executive Vice President: And year ago it was 25% subscription. James E. Heppelmann - President, Chief Executive Officer & Director: Okay. Andrew D. Miller - Chief Financial Officer & Executive Vice President: Okay.

Thank you, guys. Okay. Thank you, guys. James E. Heppelmann - President, Chief Executive Officer & Director: And the perpetual deal, incidentally, it came through a partner. Andrew D. Miller - Chief Financial Officer & Executive Vice President: Yeah. James E. Heppelmann - President, Chief Executive Officer & Director: So in some cases, a partner say, I sell perpetual then we have to think about whether or not we'll take that order... Andrew D. Miller - Chief Financial Officer & Executive Vice President: Right. James E. Heppelmann - President, Chief Executive Officer & Director: ...and I think we'd rather take it than not.

Got it. Got it. Thank you.

Thanks, Sterling.

Our next question comes from Jay Vleeschhouwer. Your line is now open.

Thank you. Good evening. Jim, could you comment on what you're seeing or anticipating among the half dozen various industries that you report out. I understand that the percentage of revenue from the industries, in any event, even pre the model change, will have varied from quarter to quarter and, of course, compounded now by the model change, but underneath all of that, when you look at your various addressed end markets organically, any key trend that you can comment on when we think about that? With respect to some of your peers, it seems there's rather some slowing in automotive and electronics, but a pickup on the other hand in industrial, and so perhaps you could comment on that? James E. Heppelmann - President, Chief Executive Officer & Director: My comment would maybe about the opposite. And again, it is very much influenced though by big deals. So, it's hard to read too much into this, but one place we did exceptionally well was retail. We have a significant and growing retail business. There was a period of time it slowed a little bit, but it's really come on strong here in FY 2016 all year long. So that for us was our overall best year-over-year performance. If you look at aerospace and defense, if you look at life sciences, if you look at electronics and hi-tech those all grew to varying degrees; life sciences a little stronger than the others I mentioned. And then the one place where we had a bit of a decline year-over-year was industrial products. But again, I don't read too much into this because I'm looking at the data quarter by quarter and it jumps around a lot. So definitely, the industrial sector has not been a great place to do business. We do a lot of business with the Deeres and the Caterpillars and they're all suffering a little bit right now. So that for us is not a great place but we didn't have a terrible quarter. It was still our highest contributor of revenue in the quarter.

Okay. A product question for you, Jim, and then kind of separate financial question for Andy. At LiveWorx, there were a number of interesting product sessions. You commented already on Navigate, which was among the interesting sessions. And you commented on CAD in the cloud. My question is if you could comment on the roadmap for Windchill. You've got a pretty specific set of releases coming. The Berlin release later in the year, couple more next year. How do you think about those in terms of possible incremental business impact and competitive differentiation, particularly given what's going on in the larger PLM space? James E. Heppelmann - President, Chief Executive Officer & Director: Yes. I have a slowly different view right now on products. And it's a view we introduced at LiveWorx which was this idea of customer transformation journeys. So what we think is that this new technology enables fundamentally new different and better ways to run certain business processes. And you might remember at LiveWorx we highlighted four of them. Digital engineering could be done in new and exciting ways. We highlighted Agile. Companies could adopt a multi-discipline Agile development process. And then we highlighted manufacturing and then we highlighted service. So more and more, we think about now how would you use elements of our existing product suites and their new technology to systematically transform the way you do engineering. And it's kind of like an orthogonal view to selling more Windchill and more Creo. It's sort of like how would you use Windchill, or Creo or Vuforia, ThingWorx, analytics to do engineering in a different way. And that's methodology that Craig has introduced. I think is a very good one. We're still doing the releases. It's just the kind of a way we think about it is less about what's coming in this next product and when can we take customers to this even greater level of transformation by combining some different solution capabilities and technologies and so forth. So it's a different way of looking at it. It kind of ticks me off staring at product release schedules and thinking more about the transformation roadmap which is something that I think we owe the world more detail on. We introduced it at LiveWorx but we need to go deeper so people understand that better. We did talk – Andy and Tim and I did talk about maybe having investor webcast... Andrew D. Miller - Chief Financial Officer & Executive Vice President: Yes. James E. Heppelmann - President, Chief Executive Officer & Director: ...to give you guys some deeper access into what we're talking about. And I think that's we'll probably reach out you to schedule it some upcoming point.

Okay. That sounds good. Finally for Andy. Given the upside in the subscriptions booking proportion for the quarter and the guidance, have you begun to perhaps rethink that 70% bookings mix that you've talked about for the out years of the guidance period or the forecast period? Andrew D. Miller - Chief Financial Officer & Executive Vice President: We're actually analyzing that right now as we do our business planning, and so we'll clearly give you the best update we can when we release our Q4 earnings. We are starting to look at – we have certain products in certain geographies that for two quarters in a row have been over 80% subscription in the direct channel, for example. And so, we're starting to look at those and think through should we frankly move completely to subscription for those products and at what point in time. We've also released a number of products, like PTC Navigate is available only as a subscription product. So most of the, or many of the, new products that are coming out are only available subscription. So we're analyzing all that stuff. The thing I want to remind you it's only been three quarters. And so it's not like we've been on the transition for two years. We've got tons of data that we're able to figure out what real trends are. We're actually having to continue to kind of segment our analysis, take out a big deal, see if the trend's still there, look at it not just by dollars but transaction count, things like that, to understand kind of where we're at and where we want to end up. James E. Heppelmann - President, Chief Executive Officer & Director: Yeah. I think it's an important question, and we ask ourselves that question all the time, but we're just – there's a process of planning next year, which we're halfway through. And it's just too early to make that call here on this particular phone call.

Understood. Thanks very much.

Our next question comes from Ed Maguire, CLSA. Your line is now open.

Hi. Good afternoon. I was wondering if you could characterize the competitive environment in IoT platforms. I know you had not seen much change since Cisco's acquisition of Jasper but I think there's ongoing interest in the partnership between GE and PTC and some of the differences between Predix and ThingWorx, if you could provide a bit of color that would be really helpful. James E. Heppelmann - President, Chief Executive Officer & Director: Yeah, I think the competitive environment overall hasn't fundamentally changed, but there's a lot more noise. There are many more stories out there that you can listen to. But I think ours, number one, has evolved a little bit and I will give you some insight into that in a second. And then number two, it's still a very strong story. So our story has evolved in a couple of important ways. We've folded in Kepware and we folded in Vuforia and those are really sexy, important, critical capabilities. We have them. Nobody else does. And ThingWorx itself is fundamentally a really great product. So, we have a very strong technical product. Now, the place we've evolved is we've decided not to fight the infrastructure war, rather than, say, send your data to PTC and we'll stuff it in our cloud, we now say, hey if you want to put your data on Amazon, or if you want to put it on Azure or various other places, we support those. We actually participated in the SAP SAPPHIRE Conference and we showed how you could put data onto HANA Cloud Platform and still use ThingWorx to process it and so forth. So we backed out of that idea of we're going to have a competitive computing infrastructure sort of based on that comment that friends don't let…

Great. And I'd just like to circle back to the augmented reality technology. It was really quite on display in compelling fashion at LiveWorx. From your perspective, does this – is the change in conversations with customers in terms of your competitiveness versus in the core CAD and PLM markets, or is this a – essentially just a value add that you expect could potentially provide incremental ASP lift for instance, for customers over time? James E. Heppelmann - President, Chief Executive Officer & Director: Well, I think in the near term it's an exciting differentiator that helps us look different and generate more ASP. I think long term it's bigger than that. And that's why there's so much excitement. A lot of people are saying that AR and AR hardware is the next-generation mobile device. Today, you carry a screen in your pocket, and there's a screen in your car, and there's a screen on the wall in your house, and there's a screen on your computer, and there are screens all over the place, maybe tomorrow you'll put the screen on your head and everything you look at will have digital displays without needing to have their own unique proprietary hardware screens. I'm just looking in my office here, I have a water cooler and I have a coffeemaker and they both have screens. So, I think the reason that Microsoft is spending billions of dollars and the reason Google is spending billions of dollars and Facebook is spending a billions of dollars and others, quite frankly, is this idea that there's a generation of hardware beyond mobile and it's AR devices. And the reason that's so exciting is because you can blend digital data onto physical objects and give an integrated physical digital experience. Now that's what's…

Great. Thank you.

And we're showing no questions at this time.

Okay. Thanks, everybody. I want to thank everybody for joining us today. On the investor front, we're going to be heading out on the road for some marketing in August and kick off the busy fall conference season with Citi's Tech Conference in early September. We look forward to seeing you at one of these events, if not we will update you on the Q4 call in October. Of course, in the meantime, if you have any questions, follow-up on today's call, please contact PTC's IR, and if not, we'll speak with you soon. Thanks for your interest in PTC and have a great evening. James E. Heppelmann - President, Chief Executive Officer & Director: Thanks, everybody. See you in 90 days, if not sooner. Bye-bye.

And that concludes today's conference. Thank you for participation. You may now all disconnect. Have a wonderful night.