[Starts Abruptly] operating results, because such statements deal with future events, actual results may differ materially from those projected in the forward-looking statements. 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 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 as of today's date, January 31, 2024, and PTC assumes no obligation to 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 Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly 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.

Thank you, Matt. Good afternoon, everyone, and thank you for joining us. There may be an issue displaying the presentation materials. So if you don't see them, I invite you to go to investor.ptc.com, you'll find the same presentation materials there and you can follow along. We are right now on slide three. I'm pleased to report that PTC's Q1 results provided a good start to our fiscal '24. We delivered solid financial results, while in parallel, making great progress on CEO succession. Over the past six months, Neil and I have run a textbook transition process and we're nearing the culmination. We spent a lot of time together and traveled the world extensively to accomplish the goals we articulated of a seamless transition that ensures continuity in PTC's strategy and momentum. Neil is ready to be CEO. He understands our business well. He's fully committed to our strategy and he has the full support of an outstanding executive team. I'm confident that PTC will continue to drive growth and profitability well as in the future under Neil's leadership. With that, I'd like to turn it over to Neil to discuss the Q1 results. Neil?

Thank you, Jim. We're on slide five. Today, I'll focus my comments on three topics: first, what I've learned about PTC over the past several months; second, the drivers of PTC's durable and consistent growth; and third, driving further value creation with discipline and consistent execution. After my remarks, I'll hand over the call to Kristian to take you through our Q1 results and our guidance. Then we will have a Q&A session. Up front, I'd like to say a big thank you to Jim for sharing his industry insight and wealth of knowledge over the past year. The transition has gone very well and has been helpful to have Jim participate as I've engaged with customers, employees and investors. I'm honored to be taking over the CEO role on February 14 with PTC on a solid trajectory. Credit to Jim and the team, we have a great strategy based on a differentiated portfolio of assets and led by a strong team. As I said, my initial focus is on ensuring that we keep building on our momentum with disciplined and consistent execution. Turning to slide six. Our customers design, manufacture and service products. Most of our large customers produce and service the world's most critical assets, for example, wind turbines, tractors, automobiles and MRI machines. The biggest learning I've had relates to what I am seeing in our customer base and how much we could do for them. Digital transformation has clearly taken hold with our customers, around the world, and finally is here to stay. Industrial companies can't have manual, antiquated or disconnected workflows if they want to be competitive in today's complex world. Our customers need to modernize the portion of their operations that spans from design to manufacturing to service. Importantly, our core products are the…

Thanks, Neil, and hello, everyone. Starting off with slide 15, PTC, again, delivered solid financial results in terms of both ARR and free cash flow, which we believe are the most important metrics to assess the performance of our business. Our constant currency ARR growth was 23% in Q1 and on an organic basis excluding ServiceMax our growth was 13%. Note, that we acquired ServiceMax in Q2 of fiscal '23, so starting next quarter Q2 of fiscal '24, we will no longer exclude ServiceMax from our organic results. To help investors understand our business performance, excluding the impact of FX volatility, we've been providing ARR guidance and disclosing our ARR results on a constant currency basis. At the end of Q1 our constant currency ARR was $2.016 billion, slightly above the guidance range we provided for the quarter. In Q1, our cash flow results also came in slightly ahead of our guidance, with operating cash flow of $187 million and free cash flow of $183 million. As a reminder, our Q1 cash flows included a $30 million of imputed interest related to the deferred payment for ServiceMax. Our cash flow performance is driven by our ARR and operating efficiency. And in Q1, we extended our track-record of disciplined operational management, while continuing to invest in key priorities like ALM and SaaS. Turning to slide 16. Let's look at our ARR growth by geographic region. Although FX continues to be volatile and the selling environment remained challenging in Q1, our constant currency organic ARR growth was solid across the Americas, Europe and APAC with growth in the low to mid-double-digits. On APAC our year-over-year organic constant currency growth increased to 14% in Q1, compared to 12% in Q4. And in the Americas and Europe, our organic year-over-year constant currency growth in…

[Operator Instructions] And your first question comes from the line of Joshua Tilton with Wolfe Research. Joshua, your line is open.

Hey, guys. Thanks for taking my questions. I'll try and sneak it, maybe two in here, if I can. Just the first one, I thought it was pretty interesting that you mentioned the selling environment kind of still remains challenging and sluggish this quarter. I guess my questions is, was it more challenging than you guys were expecting 90 days ago? Is it any better than Q4? And maybe kind of how do you expect that selling environment to be for the rest of the year?

Yes. Thanks for the question. This is Neil. We haven't seen any change. It's been a sluggish sales environment for a number of years now, particularly around the approval cycles of our customers. It's just taking a lot, and it has been for multiple years. Nothing has changed worse or better since I've been here during the transition time, and currently how we're looking at Q2.

And maybe given that answer and the guidance that's kind of out there, it is implying that a lot of growth, especially in the net new ARR, is to come through in the second half. And, I guess maybe just remind us, I know you have the deferred ARR balance, but what's kind of giving you guys the confidence in that second half net new ARR growth, especially in the context of the 2Q guide?

Yes. I'll start, and Kristian could add if I missed anything. First of all, looking at the pipeline of opportunities, I feel confident around the number and the size of the deals, the criticality of the customers, the importance of the customers that we're working with hand-in-hand to get to a conclusion, to move them down this digital transformation journey. And so, when we look at that, that pipeline is interesting to us in a manner that gives us confidence around the guidance that we gave to you that we are now targeting. And so, that's an element of it. Again, to be clear, this doesn't assume that anything changes in the selling environment from now to the end of the year. There's just an element of pipeline and a seasonality that we've always had, quite frankly, in the second-half, where these types of deals we've historically been able to close out and our intent is to do the same this year.

Super helpful. Thank you.

Thank you. Your next question comes from the line of Clark Jeffries with Piper Sandler. Clark, your line is open.

Hello. Thank you for taking the question. Great to see the resiliency of the business. Neil, I was hoping you could expand on your comments around the timeline for the cross-sell for ServiceMax. It seems like you've made some early progress in aligning the go-to-market. But could you help us think through what that success in cross-sell looks like in fiscal '24? What it looks like in fiscal '25? And what's a reasonable timeline to reach its stride in terms of reaching the existing customer base as well? Thank you.

Yes, Clarke, great question. Thank you for asking it. Look, the first year -- since clearly, I'm very familiar with ServiceMax, given my background, the first year has been integration work and really getting to know the ways in which the ServiceMax team could interact in a precise way with the PTC team. We did that. We accomplished that. We had early success, which creates some momentum. Secondly, after we saw that, we've implemented a far more constructive and direct selling process by which the ServiceMax sellers are now very much tied into how the PTC sellers are going forward, in this fiscal year. And what that's caused is two things. The customer base is now understanding of the PTC broader value proposition of the digital thread and why ServiceMax is so critical to be part of that, number one. So that's creating a level of interest, engage rate and, quite frankly, momentum that we've already been seeing. And two, the sellers now have a familiarity of speaking the language that's necessary for ServiceMax to begin scale. I foresee this year to be a time period, given the sales cycles of ServiceMax, these are all new implementations for the most part, even if they are already existing PTC customers. That takes a bit of time. And I see this year as building that momentum by which, as we said when we made the ServiceMax acquisition, this is a mid-teens-plus grower. And my expectation is, this year is the building blocks by which the subsequent years really define that sustainable mid-teens growth over or above with ServiceMax.

Perfect. I really appreciate the color. Look forward to the Analyst Day. Thank you.

Your next question comes from the line of Yun Kim with Loop Capital. And Yun, your line is open.

Hi, congrats on a solid quarter, Jim, Neil and Kristian. ARR growth, Creo CAD has been incredibly resilient for a long time. How do you see that playing out this year? Can it keep growing in the double digit consistently this year? And do you need Creo+ to kick-in to provide a tailwind for it to keep growing in the double digits?

Great question. And one of the great things with the transition with Jim is I'm far more well-versed in the amazing product that we have in Creo. And like you said, good performance from Creo. We expect that to continue. This is Creo on-premises, Creo throughout the course of this year, given the differentiation, given the strength of that product. And quite frankly, Creo+ is very limited, if at all, in terms of impacting our Creo results and the strength of it, in the near to maybe even the medium term. Like I said, that SaaS journey will be a 10-plus year journey. We're already seeing the strength of Creo on-prem, feel like that double-digit growth is sustainable. Creo+ over time, as the market adopts it, is cherry on the top.

If I could just sneak one in for Kristian. Kristian, I believe this is a big -- much, much bigger year for renewals. Do you expect to continue to focus on increasing contract length? And remind us where we are in terms of overall contract length where that has been trending, and any update on the churn rate?

Yes. Hey, Yun, thanks for the question. Churn rate continues to be low and steady, so let's start with that one. And yes, we will continue to try and move contracts to longer-term contracts, which we believe is beneficial for our customers as well as actually for PTC. So we'll continue to try and move in that direction. And then lastly, I think, your question was around the average contract length, which as it stands right now, still hovers around a two-year term.

Thanks so much.

And your next question comes from the line of Matt Hedberg with RBC Capital Markets. Matt, your line is now open.

Great. Thanks, guys. And Jim, congrats on the run as well and Neil officially taking over on, I think, the 14th, you said. So great run, Jim and Neil, looking forward to this next journey here. I guess, I had a question, Neil. You mentioned -- there's been a lot of focus on Creo+ and Windchill+. And you had some comments in your prepared remarks on the SaaS transition. I don't think a lot of people feel like this is really like what we typically see in a SaaS transition because I think you're not trying to like push customers there, but to move to the SaaS variants. But just maybe how do you kind of philosophically think about that? And are there things perhaps that you can do to sort of show the functionality, that's where it's going in the plus variants? And I don't know, maybe there's some pricing or incentives that could drive that behavior. But it feels like it's an accretive thing for you and beneficial to the customer as well.

Great question, Matt. Thanks for asking it. It's important to us. Let me just make sure I reiterate this. We have a view, I have a view, that was consistent with Jim's view that the industry will go do SaaS. That's an inevitability. As I said, we believe it's going to be, in my estimation, a 10-plus-year journey. It could be wrong, it could move faster, could take a little bit longer. But the way in which we're thinking about it here, with already some momentum built, particularly in Windchill+, Creo+ we launched a couple of quarters ago, we're building with customers already, the resilience, the scalability, the repeatability of a SaaS offering by which when other customers of similar complexity or size or segments are ready to take it on, we have built the strength and the capabilities to do that. And so, the way in which we're doing is, we're not taking any foot off the accelerator in terms of our focus, energy, investment into our plus strategy. But we do want to force customers, different than others out there, but it's very important philosophically as you ask for us to have a way in which we work with our customers as they need to migrate for their value prop to move from an on-prem system to a SaaS offering, we will be there hand-in-hand to do that. And our ultimate belief is, that will reward us in a meaningful way. When the dam breaks, we might -- we will not only get the conversion of our existing on-prem customers to the SaaS offering, but have a differentiated offer for those in other competitive environments that might want to move to the best-in-class solution at PTC.

Got it. Thanks a lot. Super helpful.

And your next question comes from the line of Adam Borg with Stifel. And Adam, your line is now open.

Awesome. Thanks so much for taking the questions. Maybe for Neil, it was pretty interesting when you talked in your script about focusing resources towards the highest priority areas. A lot of focus, obviously, on PLM, the upsell opportunities you've had. Maybe talk a little bit about IoT and AR and how you're thinking about those opportunities? And then, I have a quick follow-up.

Yes. Very important question. And to be clear, I'm going to be very consistent around making sure, across the broad portfolio of capabilities we have, to make sure with all of you, we focus in not only internally, but as we report our messaging to you around the largest value creation from an aggregate dollar perspective, those priorities, which I made around PLM, SLM, with ServiceMax, ALM, the CAD piece of it as well as how we transition our customers to SaaS. That doesn't mean IoT, AR, Servigistics Arbortext, FlexPLM aren't important. I have and we have leaders there, capable leaders working through that, many of which are important to our digital thread, many of which of those products are important to industrial manufacturers going through a digital transformation. And what I meant by prioritization and focus is as a general way in which the company has done for many years now, during the planning process, I'm making sure with the team here that, like I said, we put more wood behind the arrows that create the highest value creation opportunities and make sure those that might not have as strong of an outlook or have a different investment profile, we look at that with the time horizon and make the right concise decision to prioritize where we put the investment dollars, and where we may want to de-prioritize a few of those based on the outlook of that business. Right now, we have a very broad portfolio, I feel good about it. But, we've been doing it consistently over the last three years just making sure we're placing the next incremental dollar in the highest value creation opportunities, going forward.

Incredibly helpful. I really appreciate that. Maybe just a quick follow-up for Kristian just on the model. I think the guidance implies on OpEx, a 200-basis-point increase in OpEx spend relative to the guidance you talked about 90 days ago. Maybe talk a little bit more about what are the areas that you're looking to drive increased investments? Thanks so much.

Yes. Hey, Adam, it's Kristian. No, I mean, I think that our OpEx guidance for the year is pretty well in line -- it remains unchanged from really what we would have said 90 days ago. In terms of areas where we're investing incrementally this year, it's what we've been talking about. There's ALM in particular, there's some investments into SaaS, which includes Windchill+, includes Creo+, actually includes some Atlas those are areas where we've got incremental investment going this year. But in terms of change to the investment profile from last quarter, I'm not sure I'm tracking with you.

Got it. We can talk more offline. Thanks so much.

And your next question comes from the line of Joe Vruwink with Baird. Joe, your line is open.

Great. Thanks for taking my question, and also wanted to extend my best wishes to Jim. Another one on just maybe more recent performance. So 1Q was a good quarter for new ARR added. You finished above guidance. I think, you grew that line 20% year-on-year. Anything to call out just in terms of what drove the upside in the 1Q plan? And then, maybe looking to 2Q, any discrete factors that would explain kind of a year-over-year decline in new ARR added? Or maybe relatedly, is deferred ARR factoring any more or less in the outlook today?

Yes. Hey, it's Kristian. Thanks. Good question. So again, I think Q1, again, despite a challenging environment, I think we executed well. I think that across geographies, across product segments, hopefully, that showed through in our results. As far as the full-year is concerned, again, we are maintaining our full-year guidance, as we start looking at Q2 here. I think, we're just trying to be prudent on the immediate-term outlook. But as a reminder, I guess, for everybody as it gets back to the -- there's ARR and then there's cash flow. And on the cash flow side of things, whether there could be more volatility on ARR on the cash flow side of things, both from a quarterly and annual guidance perspective, I think, we feel very good about that guidance. But otherwise, I think seasonality is kind of in line with last year from an ARR perspective, taking into account the incremental deferred we've talked about ad Nauseam.

Okay. Great. Thank you.

And your next question comes from the line of Tyler Radke with Citi. And Tyler, your line is now open.

Thanks so much for the question and congrats to you, Neil, and Jim. Look forward to the next journey here. Neil, you talked about how you made a number of observations across the product portfolio in your time here. One of the things that stood out to me was on your comments on the SaaS transition, kind of talking about it as a 10-year journey. I think in the past, PTC had talked about it, maybe a little bit more medium-term than that. So I'm just wondering, and maybe the question is for Kristian, is there any impact we should think about on the medium or long-term financial targets, as it relates to that? And then conversely, what are you seeing on the on-prem side maybe that surprised you to the upside that's giving you that confidence, that it's about a little bit of a longer time frame? Thank you.

Hey, Tyler. So let me try, and then Kristian could add to this. The two actually are related, your two questions. And as you know, the on-prem business is delivering really solid growth. And one of the reasons why we talk about PLM, PLM expansion, we are still in the early innings of PLM, as I mentioned in the prepared remarks, in the early innings of being the system of record for product data across our customer base. It is happening in many cases. But there is, as far as the eye can see, in all the travels Jim and I have been doing to meet with customers, it is now happening. And so -- and this is based on our on-premise Windchill systems. So that gives the confidence as we think through structuring, scaling, enabling our sellers, the marketing around it, to make Windchill that system of record for product data that we're seeing in already some of our customers, that's why I have the confidence around really putting the wood behind the arrow around that initiative, combined with the ALM initiative that has a very interesting growth factor that we talked about, that is predominantly on-premise. It will move to cloud over time. But those two growth vectors are and the wood behind those two arrows are on-premise to be crystal clear. And then as a prior question asked, our Creo on-premise business is solid and rocking and rolling. So those three things combined, lastly, with the ServiceMax cross-sell, which is a SaaS product, as you know, Tyler, those give the confidence around the continuation and the types of guidance that we put out in the mid and long term. That being said, for the mid-teens and the -- midterm to long-term ARR guidance, there is an element of SaaS starting to transition into that ARR growth rate in the mid- to long-term. My point around the 10-year is the industry and all our customers will take, in aggregate, that long, but we already are taking Windchill+, some Creo+ customers along in the journey. And that should accrete in the mid and long term. And maybe we see the dam break earlier and it accretes faster, but our estimate is to be tempered here and to work with customers hand-in-hand to get that upside on the SaaS transition. Kristian, anything to add?

I think that was spectacular.

That's the first time Kristian Talvitie complimented me. Thank you, Kristian.

Thank you, guys. And so just to clarify, no changes to the medium- or long-term targets? Sounds like no, but I just wanted to clarify.

No.

Awesome. Thanks so much.

Yes. Your next question comes from the line of Matt Broome with Mizuho Securities. Matt, your line is open.

All right, thanks very much. I'll add my congratulations to both Jim and Neil. So maybe just on partnerships, it's clearly a lot happening with Ansys right now. I'm just curious if you have a view on how this proposed acquisition by Synopsys might affect your partnership there. And maybe if you could remind us the sort of materiality or the strategic importance of that partnership to you.

Yes. Look, Ansys has been a good partner of ours for many years and will continue to be a good partner. They are part of how we talk about and have a value prop around Creo and the added simulation capabilities. And we help them similarly, right, around what they're doing on simulation with ours. So it's a very good partnership for both sides and critical to both sides to a certain extent. To be clear, too, this is actually if the deal goes through, right? I'm not a regulator so I can't speculate on that. But if the deal goes through and Synopsys is the eventual owner of Ansys, the great thing for us is there's zero overlap that we have with Synopsys, which might, over time, I don't know yet, but might, over time, create an opportunity for us.

Excellent. And then maybe if I could just also ask just how your business in China resolved during the quarter? And if you've seen any incremental impacts from any sort of regulatory restrictions there? Thanks.

Yes. We haven't seen China be a drag on us.

Perfect. Thanks very much.

And your next question comes from the line of Stephen Tusa with JPMorgan. And Stephen, your line is now open.

Hey, guys. Good evening.

Hey, Steve.

Kristian didn’t come across to me as the managing uptight, but that was a heck of a comment to the new boss. Smart move.

I wanted to say it might be the first time I've complimented anybody.

And I might second that.

I think just going back to the question on costs. I think in last quarter's presentation, you said that non-operating, kind of non-GAAP operating would be up 6% to 7% I think you're saying now 7% to 8% or something like that. I think that's what the prior question was referring to. Maybe that's 4 times or something like that. I think that was probably the source of that question. Just curious as well on that.

Yes, that would be FX-related.

Yes, okay. That makes sense. And then just on your ARR kind of leverage down to free cash, you beat ARR this quarter by a little. You raised -- you beat cash by $3 million. It was like a 20% to 25% drop through on that ARR beat. Is there anything to that math? I know you guys have said with upside ARR, you'll probably invest some of that away so we should just keep an eye on your cash guidance. But is there anything to math like that, where if you get a little bit of that extra ARR, that like it's kind of hard to invest in a way that you will get some upside drop-through on that ultimately? Or am I thinking too much?

Really, no, no. That's a great question. And so let's just -- I think the right -- the thing that you need to remember with ARR and cash flow is, we'll call it ARR equates to invoicing and then cash flow relates to collections and payments. And so our standard terms are 30 days, and depending on the customer, our average terms are definitely longer than 30 days. But let's just work with 30 days, which means that any incremental ARR that we get in a quarter, that comes in the last month of the quarter actually, isn't impacting that quarter's cash collections and therefore that quarter's cash flows. That all goes to the subsequent quarter. So you have to just remember that time lag when you're thinking about it. Does that make sense, Steve?

Yes. Yes, makes a ton of sense. One last one for you on cash. Last quarter, you said 55% of the year will come in the first half. I think this quarter, it's now 58%, so a little more front-end loaded. Again, anything going on there? I mean, it would, I guess, make us feel -- we all feel, I guess, better about the year when it's a little more front-end loaded. But anything going on there from a timing perspective that stands out?

Yes, I feel better when it's more front-end loaded too, Steve. And I think what we said, if we're going to be super technical about it, is more than 55%. And now we're just kind of honing in on the map and saying it's going to be more like 58%. But otherwise, I think we had great collections performance here in Q1 and the outlook for Q2 is solid as well. So I think we feel pretty good about the range for Q2 and obviously our outlook for the year.

Great. Thanks a lot. Appreciate the color.

Thanks.

And your next question comes from the line of Jay Vleeschhouwer with Griffin Securities. Jay, your line is now open.

Thank you. You noted on the call your closed-loop life cycle strategy and your cross-selling structure and process. The question I have is about customers' receptivity to cross-selling. And what I mean is, do you see any correlation between the likelihood of cross-selling and the size of the customer or the customer's products and/or perhaps the end market? Is there anything that will make a customer in industry X or where product Y more receptive to your multi-solution cross-selling approach than perhaps another customer might be? Then a follow-up.

Yes. Thanks for the question, Jay. In terms of ServiceMax cross-sell, a key factor is having product companies, OEM manufacturers having long life cycle assets in the field. And if you want to double-click, critical assets within life sciences, electronics and high tech, the industrial manufacturing space, the ones that are in the field for a long time, the product companies are now needing service revenue to offset any declines or lack of new product innovation to make sure that they're getting a consistent durable revenue stream themselves. So that's a consistent correlation that we're seeing from a customer lens. Two is when a customer has Windchill, one thing that's really interesting is this past quarter, we won a very large industrial manufacturing win at ServiceMax, over a 7-digit-plus deal that, quite frankly, I was trying to win for five straight years at ServiceMax on our own unsuccessfully. And we were able to take this deal down because the customer has Creo and Windchill. And they, over time, as they implemented ServiceMax, want the asset field record, the system of record of the asset to actually flow back to their PLM system. So the combined solution, Jay, of -- and the correlation point of a customer with Windchill with long life cycle assets that they produce is a really nice makeup, which brings that math of 300 ServiceMax customers equated with 3,000 similar like-minded PTC customers. Last thing quickly on ALM, which is actually a big cross-sell for us as well, that's interesting to us on the other side of it. So as we mentioned I think last earnings call, we've been seeing Codebeamer as a tip of the spear where we're particularly in automotive, automotive suppliers where now we're getting in the conversation as we're showing them the Codebeamer value prop, we also have a PLM system that might not be PTC, how can the two work together with hardware configuration management, with software configuration management, Codebeamer. Should we actually look at PTC for the combined offering? That's interesting to us. We're starting to see it. I wouldn't call it a trend yet but it's another opportunity that might have a correlation that we're starting to see some early signs of, Jay.

Okay. Also, over the last two or more years, it's been demonstrable that Creo and Windchill have gained share, as you know. And I think there are some describable reasons for that. But over the course of fiscal -- of calendar '23, it did look as though CAD market shares were beginning to stabilize. And I'm wondering if you are beginning to see any evolutions or new dynamics in either CAD or PLM suggesting that customer requirements or selection criteria or anything of that kind might be changing from what they've been over the past number of years as it might affect your Creo or Windchill momentum?

Yes. I'm going to -- I'll take the Windchill piece, and maybe I could ask Jim as I'm getting deeper into the Creo piece to comment on that. But one of the interesting things we're seeing with our prioritization of putting wood behind more of the arrow in the PLM expansion category, which is predominantly Windchill, as you know, Jay, is when customers are going through an ERP migration, particularly SAP to S/4HANA, we're seeing that as a really interesting point where the customer is looking at what workflows belong in ERP system versus MBS versus a PLM system. And we're actually feeling advantaged when that introspection is happening to have more functionality being put within a PLM system, which makes Windchill far more important in the transition process. So that's a theme we're starting to see, number one. And number two, again to reiterate, the idea of having a broad portfolio not only on the SLM side, ALM side, I believe we're starting to have the customer conversations where having a Windchill PLM system becomes more critical to have a common data flow over time through the thread. And we'll see whether that amounts to competitive placements, but we see that as a continuation of some themes that are interesting for us for Windchill expansion. Jim, do you want to talk about Creo?

Yes, maybe I could add. Jay, I think your point is that PTC has had good double-digit growth, steady as she goes, for some years now with Creo. And some of the competitors have lost momentum and then seemingly gained some of it back. I think you know we have one European competitor in particular whose customers aren't that happy, and that dynamic serves us very well. Now it looks like they have some momentum, but I think you remember, too, they put through some fairly nasty price increases, which I think might cover up a little bit what's really happening because the price increases might give them some short-term growth but actually exacerbate the problem that the customers are frustrated about. So I don't know. I feel like our business has been steady. And we think, as Neil said clearly before, will continue to be steady. Creo+ maybe offering a bit of a tailwind over time. I think that we're in a position to take share with Creo and to take share on the other end of the customer base with Onshape. And so I like our CAD prospects.

Very good, thank you.

And your final question comes from the line of Saket Kalia with Barclays. Saket, your line is now open.

Okay great guys, hey thanks for squeezing me in here. I'll keep it to 1 question. Just first off, congrats, Neil, on the upcoming appointment, and Jim, tip my cap to you for all the years at PTC and the industry. The question I want to focus on here maybe for Kristian and Neil is just the ALM business overall, right, really spearheaded by Codebeamer. How do we -- can you just maybe give some contours on roughly how big that business is from an ARR perspective, how fast it's growing roughly? And Kristian, you talked about sort of the range of outcomes in sort of this ARR guide. How much can Codebeamer sort of affect that range of outcomes? Because it just sounds like there's a lot of excitement, a lot of product success there. I wanted to just put some numbers around it to the extent we could.

Yes. I mean, I'll start, Saket. Good to hear your voice. I'll let Kristian talk about if we do break out ALM from a size perspective. But it is, from my perspective, nowhere near the size of Creo and Windchill at this current time. However, the pace of growth is extremely exciting. I mean, as fast as I've seen West Coast start-ups start growing, I'm starting to see that same level of percentage growth year-over-year. We got some work to do so it's not going to be a straight up into the right line. But that being said, one of the things we've been seeing is Codebeamer is catching fire. I think we mentioned that as a quote from last quarter's call. And we're seeing as the adoption occurs or a POC occurs at a large automotive company that, for example, Jim and I were in Japan. Once they start testing out, this thing goes big relatively quick. As an example, we won a very -- what we thought was a very large Codebeamer, not the one that we press released, another one within Q4, right, of last year of a large European auto maker. This last quarter, we got an add-on order already of sizable value from that same customer. So that's leading to this excitement piece, number one. Number two is some of these deals with Codebeamer are very substantial size, right? Not only the add-on orders but like the size of the deal because the users that need software development tools like Codebeamer, are, in some cases, a lot larger of a population than the mechanical engineers. And so that's why it has such a what we call a prioritization of the high dollar value creation opportunities. That's why part of that.

Could I just add? It's also a very strategic high ground. It's an important piece of business to win.

Absolutely, absolutely. Anything we could talk about in terms of, again, just sort of contours, rough sizing, because it does feel like an important sort of long-term investment area?

Yes, here. So let's just try rough sizing and say it this way. This year, we ought to pass through the $100 million mark on ARR with our ALM segment.

To be clear though, that would be the integrity product we previously had plus the Codebeamer product added together, yes.

So like a total ALM portfolio would be $100 million by the end of this year?

At some point this year, yes, and it's growing faster than the...

Accretive to growth.

The overall company growth. It's accretive to growth.

Got it, got it. Guys, very helpful. Again, tip my cap to both of you. Well done.

Great. Thank you. So I think that's the end of the questions. So before Neil wraps it up, I'd like to just take a minute to personally close out with PTC's investor community and to thank all of you for so many years of support. During my tenure, I always listened carefully and took investor input seriously, and it helped shape our strategies and allowed the PTC team to really move the needle on value creation. I know Neil will do the same. The transition process with Neil has been lengthy, thoughtful, and frankly, it was even a lot of fun. As a result, I can tell you with confidence that Neil and team are ready to go. Neil has my congratulations and full support. So I want to sign off then by saying thanks, and goodbye one last time, knowing I'm leaving a strong company in good hands. Over to you, Neil.

Thanks, Jim, truly, and thank you, everyone, for joining us and for your questions today. In the weeks ahead, Kristian, Mike DiTullio, Matt Shimao and I will be on the road participating in investor conferences, and it would be great to keep the dialogue going. During the last week of February, Kristian will be at the JPMorgan Credit Conference in Miami. Matt will attend the Wolfe Conference in New York. During the first week of March, we'll be at the Morgan Stanley and KeyBanc conferences in San Francisco, then Mike DiTullio will attend the Virtual Loop conference during the second week of March. And also, we have two bus tours coming to visit us at our Boston headquarters next week. Those visits will be hosted by Kristian and me. Please reach out to JPMorgan or Piper Sandler if you're interested. And on behalf of the team, thank you, again, and we look forward to engaging with you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.