Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to PTC’s 2025 First Quarter Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. I would now like to turn the call over to Matt Shimao, PTC’s Head of Investor Relations. Please go ahead.

Good afternoon. Thank you, Sarah, and welcome to PTC’s 2025 first quarter conference call. On the call today are Neil Barua, Chief Executive Officer; and Kristian Talvitie, Chief Financial Officer. Today’s conference call is being broadcast live through 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 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. 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, February 5, 2025, 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 presented 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, Neil Barua.

Thank you, Matt, and good afternoon, everyone. PTC started fiscal 2025 as anticipated, with our first quarter results coming in slightly better than the guidance we provided, which contemplated a difficult macro and our go-to-market changes. The consistency of our ARR and free cash flow underscores the strength of our diversified business model and our discipline focus on execution. While we continue to see a sluggish selling environment in Q1, I am pleased with the intensity we have internally to ensure we exit fiscal 2025 with increased momentum. This includes the focus we have on our go-to-market transformation, as well as many important purposeful product releases, augmented by the work we are doing in AI. I’ll share more on these key business initiatives during my comments today. For fiscal 2025, we’ve reiterated our ARR and free cash flow guidance ranges, and we think the guidance we provide for Q2 and the full year is appropriate. Kristian will take you through the details. Turning to Slide 4. First off, I’d like to provide an update on the changes we announced last quarter to our go-to-market organization. We’ve made significant progress reshaping our approach to be vertically oriented and the changes are energizing our team and customers. These efforts are designed to align us with our long-term growth opportunities and ensure we remain well-positioned to deliver value for our customers and shareholders. As part of this transformation, we welcomed Rob Dahdah as our Chief Revenue Officer in December. Rob’s reputation for excellence in enterprise software is already evident. His impact on the sales team and his focus on performance standards are in early stages and showing promise. Rob is also instilling greater alignment across our sales, customer success, and marketing teams, setting the stage for sustained growth over time. In addition to…

Thanks, Neil, and hello, everyone. Starting off with Slide 9, our ARR and free cash flow results in Q1 were in line with our guidance. As you know, we believe ARR and free cash flow are the most important metrics to assess the performance of our business. To help investors understand our business performance, excluding the impact of FX volatility, we provide ARR guidance and disclose our ARR results on a constant currency basis. At the end of Q1 2025, our constant currency ARR using our fiscal 2025 plan FX rates was $2.277 billion, up 11% year-over-year. In Q1, we saw a continuation of the challenging selling environment we’ve been experiencing for a couple of years now, and this continues to impact close rates. Also consistent with our expectations from a quarter ago, our constant currency ARR growth in Q1 was impacted by two factors, which we called out on our previous earnings call. The first factor was the linearity of deferred ARR in fiscal 2025, and the second factor was a couple of contracts that resulted in churn in Q1, which are contracted to come back into ARR later this fiscal year. Moving on to cash flow. In Q1, our free cash flow was up 29% year-over-year as we continued to invest in our key focus areas at the same time. Note that the $236 million of free cash flow we generated in Q1 absorbed $11 million of outflows related to our go-to-market realignment, which is in line with our expectations. Turning to Slide 10. Let’s look at our constant currency ARR growth in more detail. Looking at our product groups, our constant currency ARR year-over-year growth was 9% in CAD, driven primarily by Creo, and 11% in PLM, primarily driven by Windchill, Codebeamer, IoT, and ServiceMax. On a…

Thank you. [Operator Instructions] Your first question comes from the line of Jay Vleeschhouwer with Griffin Securities. Your line is open.

Thank you. Good evening. Neil, your various comments on new products or product expansions are quite interesting to me. And one thing I’d like to ask about is your comments about the AI product specifically. Maybe you could talk about how you’re organizing and investing in those. Is this a segment or product specific development effort? Is it a central AI group that is managing all of these developments? So there’s some commonality within the company for your AI proliferation. And then just to finish up on the product side, you alluded to some expansion into manufacturing process. This is something that two of your larger competitors, Dassault and Siemens, have clearly been investing in and seen new business in. Is this an incrementally important use case or application area for you?

Yeah, thanks for the question, Jay. On that, I’ll take the second piece. In fact, we had a contingent of a number of people, partners as well as employees today here at the Seaport this week, working through the manufacturing process, please, and process category and value that we’ve got. The way we’re approaching it is we believe extending PLM Windchill data to the manufacturing floor is where our value resides. And we see that working in conjunction with the MES systems of the world that are deeper into that workflow, we will provide the PLM data to those systems and ERPs is our approach on the manufacturing side. On the other piece on the AI, as you know, as we’ve talked about with ServiceMax, we were letting 2024 be able for our teams to self-introduce and innovate and experiment with AI technologies over the course of 2024, you saw the ServiceMax team really doing a nice job, Jay, by the way, has also done a really nice job with that, thinking through all different technologies and approaches for working with customers on betas, by which now, as I talked about, ServiceMax’s GA on February 10th here, their ServiceMax AI piece, and that was done within the ServiceMax team. But what we’ve seen with Codebeamer now, in the interest that we got out of the Ignite conference and the work we’re doing, Volkswagen and Microsoft for the Codebeamer launch, and subsequently, what we’re doing with Windchill and Creo. We’re now in the process and I’ve already started an alignment of a group that is actually centered in on making sure there’s alignment across all our AI innovations that are happening in our product segments. So, we’re evolving it, as I said, it was always going to be an approach that’s valuable and practical and to make sure there’s value for customers, and over time, going to create to PTC. And, I think, we’re at the stage where we were crawling last year, we started walking and it’s time to move into the jog, to run pace based on the customer feedback we’re getting around this. And this space is evolving very quickly and will be very nimble towards things that are changing around that manner. But we’re energized, as you can tell, around the addition of AI capabilities into what is already great products for the company.

Yeah. Thank you, Neil. Thank you, Kristian.

Thanks, Jay.

The next question comes from Jason Celino with KeyBanc Capital Markets. Your line is open.

Hey, thanks for taking my question. Actually, kind of building off of, one of Jay’s partners, two of your competitors, your European one seem to be really battling it out on the PLM side. Ironically, one seems to be taking share from the other. Where does PTC fall in all this? I mean, have you seen any changes to the competitive environment? Any changes to your win rates? Are you involved in some of these or are you happy? Just be watching on the sidelines. Thanks.

So we’re fully in the arena. No being on the sidelines here, Jason, as you know. And I think what I would say is given we’re three players in this really remarkable industry where all boats are lifting, because of these digital transformation needs. I’m glad to see all of us kind of rising to the occasion, and as I said, very optimistic around how this will translate over the next number of years in front of us for all three of us competitors. That being said strategically, our focus from a PTC perspective is that the nerve center is our Windchill and Codebeamer product capabilities. And we have amazing CAD tools like Creo, obviously, and Onshape and we have really great aftermarket capabilities in our SLM suite. Our approach which is differentiated versus the two that you mentioned is, how do you really think about as a customer of the utilization of Windchill in coordination with your CAD systems or the big Creo or others, and how does software kind of get embedded into what’s happening within product development cycles, and that’s our approach and the competitors as you heard this past week, they’re battling it out in the manufacturing side, which Jay talked about. We’re not there, we’re not going there. We’re actually just showing our PLM data to the manufacturing floor. So, let our two competitors play out the manufacturing side. We’re really focused on, where does the product data actually need real-time understanding and democratization of that moving through the enterprise and our Windchill, Codebeamer in conjunction strategic intent is very differentiated versus our other two competitors, and we feel good about how we’re positioned there.

Perfect. Thank you.

The next question comes from Ken Wong of Oppenheimer & Co. Your line is open.

Thank you for taking my question. Kristian, I just wanted to ask about the trajectory of NRR. When I look at kind of Q2 being a little sub-seasonal, and then I maybe meld that with Neil’s comments that you guys won’t hit your go-to-market stride until Q4, is it fair to assume that we should be looking at kind of slightly sub-seasonal net new ARR until you hit that fourth quarter?

Yeah, I think we’re not providing specific Q3, Q4 guidance at this point, but as we said in the prepared comments, we do have a maybe even slightly more than usual back half-loaded year, of course, back half-loaded year is pretty typical for PTC and we’re kind of around the edges there.

Okay. Got it. All right. Thank you.

The next question comes from Siti Panigrahi with Mizuho. Your line is open.

Hi, thanks for taking my question. Neil on your comments about exiting fiscal 2025 with momentum and maybe grow in 2026. Help us understand the progress you have made on the go-to market alignment side given Rob joined recently a CRO. And also on the macro side also, we recently saw manufacturing PMI bouncing back 50, above 50 after 2 years wondering what other metrics that you look at to feel comfortable on the macro side.

Thanks for the question, Siti. I’ll take the first one. And thanks for it. I want to just level set again on reinforcing the two main reasons for why we’re making in the process of all these go-to-market changes. First is to make us more effective at serving our customers. And the second is to make sure as we scale, we sustain our low-double-digit ARR growth target over the medium-term, right? So that’s what we’re like centered in on from all the changes that are being made. And in terms of the changes in Q1, we’re showing early promise and I’m seeing the teams being motivated, customers reacting to this as well. But like three dynamics of the things we’ve already undertaken and are now well underway in executing. First is, in Q1, as we talked about, we’ve verticalized our go-to-market approach. Top verticals are industrial products, FA&D, automotive, medtech and electronics and high-tech. So we did that in all the heavy lifting to make sure the messaging, the account transition, the plans to go execute as we’re starting to do here in Q2 has been put in place. If you watch LinkedIn, you’ll see the marketing messages very tailored around industry verticals. So point number one. Two is, we brought Rob, our new CRO in early December. Rob’s acclimated real well so far. He’s infusing a ton of discipline and depth into, as an example, our weekly pipeline management processes. He’s working through the overall go-to-market offering rhythm, which should he’s targeted to make sure we’re getting a more consistent and predictable way to grow the business. He’s also, this is really great, is Rob’s working with CK, our Chief Marketing Officer, to make sure they’re combined in their efforts to execute across this vertical strategy. And lastly, just…

Neil, I appreciate the great color and all the LinkedIn posts.

The next question comes from Tyler Radke with Citi. Your line is open.

Hi, thanks. This is Peter [ph] on the line for Tyler. In your presentation, there’s an example of a medtech Windchill customer expanding their seats from 10% to 15% to over 50%. Just curious, how much of the opportunity is there so less like within the existing PLM customer base to see key kind of expansion, like outside of that core engineering team and like side deeper into other departments, whether that’s like quality, supply chain and manufacturing.

Yeah, there’s a reason why I start every call since I started last February around PLM and the opportunity there. The expansion of PLM in every call we’ve been talking about examples of customers that are now seeing the value of PLM being enterprise driven, not just a CAD repository tool, a PDM like tool. It is now becoming enterprise PLM and we have a significant opportunity across our already existing base of customers that are still at early- or mid-stages of expanding PLM to all the seats like this example the customer did. So that is the reason why we’re pushing in all cylinders to get enterprise PLM known and integrated with what they could also do with Codebeamer is a very critical value prop to our customers. So this is the area that we feel very energized and it gets even better when we create a vertical approach to how automotive companies are using Windchill to expand their utilization of product data moving faster than enterprise. How does federal, aerospace company think about that? And we’re really advancing that and we’re just needing to prove it out to more customers to expand. That is a clear priority of the business.

The next question comes from Steve Tusa of JPMorgan. Your line is open.

Hey, thanks for let me in.

Hi, Steve.

I wish I got as excited as you guys do about the macro data, like Kris this morning with the ISM or the PMI. On the macro front, how are you seeing the focus on AI impact decisions and budgets, more specifically than just what normally happens at this time of year on budgets?

Within our space, and I talked to this, I think, last quarter of the quarter before, Steve. Most of our customers still need to make sure that they have a structured data set by which you can apply AI tool. So like as per the prior question, when you don’t have enterprise PLM and a number of your engineers and supply chain folks or human folks still use antiquated systems or spreadsheets for data flows around product data, it’s very hard to apply generative AI. So we call it get your digital house in order. We really feel, Steve, this is why Kristian and I talked about the robust pipeline we see in the second half of the year. That is inspired by the fact that people need to get going on getting PLM systems across their enterprise, get Codebeamer deployed, make sure they have 2D models moved to 3D and model-based definition across their CAD drawings. And what’s really interesting is when we add the AI concept of Codebeamer as an example that we’re really going to be stoking the flames with to make sure people understand the real value here at HMI, it then creates a necessity for the customer to deploy Codebeamer on their underlying requirements management capabilities, so that they actually can get the benefit of a generative AI tool like Codebeamer AI that we’re launching. So Steve, I actually think it’s a good benefit for us, because it’s creating our customer base to get their digital house in order. And now with our additional AI offerings, which we have a secret sauce to give to them in concert with them, I think we’re in a good spot.

Great. Thanks for the color.

The next question comes from Joshua Tilton with Wolfe Research. Your line is open.

Hi, this is Arsenije on for Josh Tilton. I just had a question really on the ARR performance look. It was within the range of guidance, but even after adjusting for the timing impact and for the ARR, it looked like it was below year-over-year irrespective of the environment, not really changing, still mixed. I guess what occurred to really, is there some underperformance in the channel versus expectations, or is it just kind of exactly within what you were expecting, even on the channel front, and expected still better visibility with growth recovery in the back half? Thanks.

Let me start, and then Kristian, this quarter we guided towards the number and we came in thereabouts. Even from an internal expectation, we saw this, we took an account, the pipeline, the slugger sales environment, obviously all the changes we’re making go-to-market and we structured a guidance as such. So we’re past Q1, it was as expected from our perspective. What we’re really focusing on is, let’s get the machinery working as I mentioned on the go-to-market side. Let’s get these product releases out, messaged and customers really buying into it by which when Rob and CK get the go-to-market transformation, really humming that I mentioned in the tail end of this year, second half of this year, we have a real rhythm to close out already a robust pipeline and keep adding to it, by which we can now really see a sustainable path for low-double-digits ARR growth as we go into next year, which has been our medium- and long-term targets. Kris, anything to add?

Yeah, just reiterating what you said, we came in pretty close to our internal targets panel actually had a strong quarter this quarter. So, all-in-all, I think it was largely as expected.

Got it. Thank you.

Thank you.

The next question comes from Nay Soe Naing of Berenberg. Your line is open.

Hey, guys. Thanks for taking me in. I’ve got two questions if I may. The first one on the go-to-market changes. It sounded like you made quite a lot of good progress in Q1. I just want to get a sense of whether that was ahead of what you shared, you all got everything’s pretty much on track. And then secondary question to that is that, Neil, I think if I remember correctly, you said about alternate that you weren’t expecting any major disruptions of sales from the go-to-market changes, now that it’s been a quarter, can we get an update on that front, please?

Sure. In terms of where we are in the transformation versus where we thought, I’m pleased with where we’re at. Obviously, I would have liked Rob to join a month earlier when I did some of the folks that moved out of the company come in. We had a month gap before he joined back in December. But he’s hit the ground running in December, and the team didn’t wait for him to get here. And he was really well acquainted with the plan. So in general, I would say in a very specific project plan that we’ve had for this transformation, I feel good that we accomplished a lot of the foundation laying Q1. Now, we’ve had our kickoffs in January to get, now that the account transitions are done, comp plans are out. If you’re watching LinkedIn again, we’ve really had a good time kind of launching all this in the January timeframe. And as I mentioned, the reason for why we’re talking about the next few quarters is now the framework, the operational discipline, Rob’s bringing to bear, the vertical approach, we believe that that just will take some time to catch rhythm. It could happen faster, but my experience would say, it takes a few quarters to really get the machinery moving here. In terms of disruption, what I’d say is we made a lot of changes in Q1 and the different approach that Rob is taking and CK is taking around this vertical piece is change. And when we thought about this, this is why we proactively came out to you last quarter and said, look, like in our guidance, we are going to have a framework by which there should be a level of impact from the go-to-market changes. In addition to our estimation that the macro remains sluggish. And that’s why we came to that 9% to 10% ARR range that we reiterated again on the call today for the year.

Well, it all makes sense. Thank you very much. One quick question, if I could squeeze in if that’s all right. The AI product launches are upcoming, not also very exciting, but are they going to be limited to just Codebeamer and ServiceMax or will that be across your entire portfolio?

Nay, it like a great question. Stay tuned that the ServiceMax is first one out of the gate. Codebeamer is a big element that we’ve been working on that at Hannover Messe will be spending a lot more time on. Obviously, as you know, we’ve been spending time working on this with Volkswagen, Microsoft. We’re working through a Windchill applied AI element around parts reuse. Onshape has been doing a lot of work on this, so stay tuned on that. And we got a few more up in the hopper, but we’re really focusing on the core areas right now and learning from a very innovative technology that’s moving. So we’re learning around that in conjunction with our customers. That’s really important here to show real value versus just a marketing message.

Sounds good. Thank you. We look forward to it.

The next question comes from Saket Kalia of Barclays. Your line is open.

Okay, great. Hey, guys, thanks for taking my question here and fitting me in as well.

Hey, Saket.

Kristian maybe – hey, guys. Kristian, maybe for you and Neil, please feel free to chime in here, right? So I want to go back to kind of the five pillars that Neil, you talked about in your prepared comments, right? So, clearly, there are a few higher growth parts of the business like an ALM or an SLM or a SaaS part of the business just because of their scale, right? I think the strong competitive position drives solid growth in PLM and CAD, but it feels like those three segments have the potential to grow faster. Maybe the question is, where are those businesses in their evolution in terms of being more additive to growth? And then maybe the other side of that coin, how much of a drag are some of the businesses that maybe aren’t those pillars anymore, like an IoT, for example? There’s a lot of moving parts in that question, but does that make sense?

Yeah. Well, let me take the front end, and then Kristian could add any color here. I just want to be clear. The PLM and the ability for us to expand these, like we mentioned in this customer example, there’s a lot of room for us to grow with the best-in-class PLM offering in the marketplace. Far none, in my opinion, and I think in our customer’s opinion. When integrated with Codebeamer, our ALM suite, we believe that there is a real strong growth potential for those two boats to rise in a significant manner that really creates a differentiated value to the end customer. So I just want to be clear. PLM is part of a very strong growth drive of the business, and we just see many more potentials for that to increase in growth rate as we get this vertical approach, right, as we get the messaging on ePLM really structured in the marketplace. So, I’m just not – we’re not just relying on ALM, SLM and SaaS to be the inflectors of accretive growth. PLM actually will pull its weight, and then some, in our view, in terms of the approach that we’re taking. In terms of the drag, you mentioned some of them. As I indicated on Windchill Navigate view work instructions where we’re extending 3D digital work instructions from PLM to shop floor, guess what? We’re using ThingWorx technology to do that. And if you recall 9 months ago, we took a number of resources from the standalone businesses and moved them to make sure the great technology of ThingWorx actually allowed customers to expand PLM and provide more value to different personas. We’re doing the same on some of those other product sets that don’t really do as well versus our core growth rates to make sure we augment our core growth rates with better capabilities using some of those technologies. That’s how we’re thinking about it from a perspective of how we’re interfacing with our customers and organizing ourselves internally. Kristian? No? Good.

That’s super clear, guys. Thank you very much.

This concludes the question-and-answer session. Please remain connected as I turn it to Neil for closing remarks.

Thank you, everyone, for joining us and for your questions today. In February, Kristian will attend the Baird Conference in Park City, Utah, and Matt will attend the Wolfe Conference in New York. In March, I’ll be in San Francisco attending the Morgan Stanley Conference together with Kristian and Matt. Also in March, Kristian and Matt will participate in two additional conferences, the Loop Conference, which will be virtual and the Stifel Conference in New York. Thanks, again, and we look forward to engaging with you.

This concludes today’s conference call. Thank you for joining. You may now disconnect.