Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to PTC's 2025 Fourth Quarter Conference Call. [Operator Instructions] 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, operator, and welcome to PTC's Fourth Quarter and Fiscal Year 2025 Conference Call. On the call today are Neil Barua, Chief Executive Officer; Kristian Talvitie, Chief Financial Officer; and Robert Dahdah, Chief Revenue Officer. Today's conference call is being broadcast live through an audio webcast and a 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, November 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 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, Neil Barua.

Thank you, Matt, and good afternoon, everyone. I'll begin by addressing the press release we issued earlier today regarding the definitive agreement we've reached for TPG to acquire our Kepware and ThingWorx businesses. This is exciting news for us. For our Kepware and ThingWorx customers, this move is designed to enhance the value these products deliver. By partnering with TPG, Kepware and ThingWorx gained additional investment, expertise and operational focus, all for the businesses to continue growing and delivering more for customers. For PTC, this move increases our focus on the area central to our Intelligent Product Lifecycle vision. CAD, PLM, ALM and SLM and the growing emphasis on SaaS and AI. With our resources and investment concentrated in these areas, we will continue helping our customers address some of their most pressing challenges by enabling them to fully leverage the value of their product data and to transform each stage of life cycle. When the transaction closes, we will maintain a close relationship with the Kepware and ThingWorx businesses to ensure a smooth transition. Kristian will walk you through more of the transaction details in a few minutes. Turning to fiscal '25. Q4 was another quarter of solid execution. We delivered 8.5% constant currency ARR growth and 16% free cash flow growth year-over-year. Throughout the quarter, we were encouraged to see some of the early benefits from our go-to-market transformation show up operationally. Our execution on large strategic agreements improved through better coordination between our sales, technical and customer success teams. We said on our Q3 call that we had a robust pipeline of large Q4 deals, and I'm proud to say we closed most of them. The dynamics of these deals are encouraging in the context of our Intelligent Product Lifecycle vision and focus areas. We won our…

Thanks, Neil, and hello, everyone. Starting off with Slide 6, I'd like to provide some more details on the Kepware and ThingWorx divestiture. The transaction is expected to close in the first half of calendar 2026, and our expected use of net after-tax proceeds will follow our overall capital allocation strategy of returning excess cash to shareholders while leaving room for any potential tuck-in acquisitions. We could receive up to $725 million in total cash consideration if certain thresholds are achieved. We expect either $565 million or $600 million upfront, depending on performance during the period up to close. The $125 million future potential earn-out is based on certain criteria related to a potential future transaction by the buyer. Assuming an April 1 close and a $565 million upfront payment, we would expect net upfront proceeds of approximately $365 million after working capital and indebtedness adjustments, divestiture-related fees and taxes related to the transaction. Turning to Slide 7. In fiscal '25, ARR attributable to Kepware and ThingWorx was approximately $160 million, and constant currency ARR growth was negative 1%. Including perpetual license and professional services revenue, the revenue contribution of Kepware and ThingWorx was approximately $200 million. We estimate that approximately $70 million of free cash flows was attributable to Kepware and ThingWorx in fiscal '25. For fiscal '26, we're providing constant currency ARR guidance for PTC, including and excluding Kepware and ThingWorx. ARR growth, excluding Kepware and ThingWorx, is expected to be 50 basis points higher. Also, for fiscal '26, we expect the Kepware and ThingWorx transaction will impact our as-reported free cash flow primarily due to onetime transaction-related items. To illustrate, I'll take you through a model on Slide 8. Starting at the top with our $1 billion of free cash flow guidance for fiscal '26, which assumes…

[Operator Instructions] Your first question comes from Ken Wong with Oppenheimer & Co.

Fantastic. Neil, congratulations on the divestiture of the IoT business. Perhaps you can give us some context behind the decision to move on from ThingWorx and Kepware. And then what should we, as investors, deem to still be strategic in the portfolio? Are there any other products or components of the IoT business that still needs to be shut off?

Yes. Good to hear from you, Ken. So first off, on the decision process, as I've been saying for a couple of years now, we've been really focusing on putting the wood behind the arrows around the things that create the greatest customer opportunity and for PTC where we have the highest right to win. And we talked through all the core priorities, which has now formulated itself into this vision around the Intelligent Product Lifecycle. And because of that and because of the needs and the requirements for our customers around execute across that vision, we decided to make sure that every single person in the company all our resources or attention are dedicated to executing across achieving that vision of the Intelligent Product Lifecycle. And so that's the way we led towards the strategic decision on saying, look, at the end of the day, Kepware and ThingWorx, good businesses, great products, but quite frankly, TPG has a thesis of getting deeper onto the factory floor in operations. And those products will do very well under that framework, leaving PTC, the ability to really continue to deliver what hopefully you saw in Q4, Ken, around executing around our core priorities and just ramping up that focus and attention on it. In terms of your second question around the strategic component of what we have left. I feel good as we sit here around the portfolio and how it relates to the Intelligent Product Lifecycle, how it relates to building a product data foundation for our customers, how it relates to our ability to apply generative and agentic AI to that product data foundation and how to send that product data to other constituents of our customers like in the service department, et cetera. And so collectively, I feel good now that with the transaction closing, we have an ability now to fully focus all our portfolio and energy across -- executing across the Intelligent Product Lifecycle vision that we laid out.

Your next question comes from Jason Celino with KeyBanc Capital Markets.

Great. I know a lot of moving parts, and it's somewhat a muted point because of the Kepware cash tax implications, but Kristian, the $1 billion free cash flow guidance, is there any way to know how much of a [ OBBA ] benefit you're expected to see next fiscal year?

So there is some tailwind from the new Section 174 decision that was in [ OBBA ] that is included in that number. To be honest, we don't actually have to make the final decision on which of the 3 main doors, i.e., the all 1 year, 2 year or just let the amortization run out doors, we go through until later this fiscal year. Remember, though, that that's also offset, also included in that kind of $1 billion number is the incremental CapEx that we're seeing related to the transition of one of our largest R&D facility into a new office. So there's a bunch of puts and takes that go into that number. But certainly, the tailwind from Section 174 is included in that number.

Your next question comes from Clarke Jeffries with Piper Sandler.

I wanted to ask how you would characterize the push versus the pull with the deal structures this quarter. Did you feel like some of these customers were wanting to push out certainty and maybe they wanted to make the commitment, but they didn't know what the next 12 months might hold for them, so they wanted to commit to a ramping deal or a longer duration agreement? Any color there would be helpful.

Sure, Clarke, good to hear from you too. The -- so let me be clear, in Q4, as we mentioned on our Q3 call, we had a number of large transactions in the pipeline. As I mentioned in the upfront, we closed the majority of those, an excellent execution by the team. We also mentioned that the variance in the ARR for Q4 would happen based on the variability of how the deals will get structured. And in the larger deals, in some transactions, as we've noted, there was ramp deals. And those are committed, contracted elements of the deal, not, maybe we'll spend the money. Those are contracted with PTC, and we chose to do the right thing for the customer and ourselves, which is execute and capture that demand and have a large set of deferred ARR, as Kristian talked about, in '26 and even a larger set of net deferred ARR post-2026 with some of these deals that we captured within Q4. So we feel good about it. And it's -- ultimately, as we think about as stewards of the business, capturing the customer demand, having them commit to it, which is exactly what deferred ARR is, is what we're playing towards. The anomalies back and forth of what is in quarter start within a quarter or 2 is something that is important, but not as important as the capturing of the customer demand.

Your next question comes from Blair Abernethy with Rosenblatt Securities.

Congrats on the Kepware sale. I guess 2 things for me, Neil. First off, as you kind of move away from the factory floor a little bit here, how are you thinking about your TAM business, computer manufacturing side of things. Is that -- does this alter your view on that at all?

No, I actually feel better than I did about the addressable market that we're playing into with Intelligent Product Lifecycle than I did 2 years when I took the job. And the reason for it is that throughout the portfolio of building what we're calling the product data foundation with our CAD capabilities, with our ALM capabilities, with our PLM capabilities and then our SLM capabilities anchored by ServiceMax and Servigistics. When we think about that opportunity and where the customers are driving for their digital transformations to make sure product data is clarified across their enterprise and sent to the right constituents. And then Blair, adding on top AI to that product data foundation has so much breadth and capability for us to execute across. And you saw that again in the customer testimonies that we showed in Q4 around customers really acclimating to the strategy, wanting it and really energized about our AI strategy that is a part of the Intelligent Product Lifecycle. So Blair, I'm more thrilled than ever before starting today that we have executed across the ThingWorx, Kepware, put it in the right home because we got a lot of business to take care of here on our existing strategy across the Intelligent Product Lifecycle.

That's great. And if I could just slide in one for Kristian. Kristian, just kind of looking at your net new ARR growth of $194 million last year, and you're saying midpoint, $195 million this year. How are you feeling about the overall environment that you're going to book at the same kind of level, just kind of how do you sort of come to that -- come to the number for '26?

Blair, I raise my hand. So let me take the front end of this, and then Kristian could add to it. The way we're looking at it is this approach of our guidance for '26, I would characterize as a disciplined approach to making sure you understand the dynamics of how we're thinking about this year. First off, we're benefited by a very strong committed deferred ARR entering this year versus what we had last year. So that is a strong set of ballast that we've got within a committed set of ARR coming into the business, predominantly in the second half of the year and predominantly in Q4, as we mentioned. We also have been undertaking, as we mentioned, a go-to-market transmission that is about 9 to 10 months in the making, and we feel very strongly that we've moved the ball forward but still the work needs to now become a repetition and durable. And when we think about that, in light of the divestiture and, call it, the 6-month time period from today's announcement to close or 9 months in calendar year, but in that framework, we modeled out April 1. When we take the context of all the work needed to talk to customers that are jointly looking at pipeline opportunities with ThingWorx, Kepware and other products, we took that into consideration and said, look, if there is disruption at all from this divestiture for the next 6 to 9 months and the macro gets worse than what it is right now, then there's a possibility of the low end being something that we all should consider. But if we're looking at the way the business is going right now and we think about the deferred ARR, the momentum that Rob and team have been building on the go to market and think about the customer pull that we're getting, the midpoint is actually with the macro not getting worse or better is a good way to look at it. Now we have -- the reason why we're disciplined, we actually have line of sight to get to the high end of the guidance in terms of go-to-market progression continues to repeat, the greatness that we saw in Q4, builds on that and continues that process. The macro doesn't get weaker and tightened -- Kepware and ThingWorx actually doesn't become a distraction. We've got that range from a disciplined manner. So the good news is we're looking at it, we're being disciplined around our approach. We got a lot of hard work going to make sure this go-to-market transformation continues on the path it is. And we're working hard to make sure that results speak for themselves as we get into the course of this year.

Your next question comes from Matt Hedberg with RBC Capital Markets.

Great. Neil, it's been about a year since you put in the verticalized sales force. I'm curious, are there any other significant go-to-market changes that you're planning for this Q1? And how might that sort of vertical focus pay additional dividends as you get another year under your belt?

Yes. So I'll start and Rob sitting right here next to me, ready to get called into this match here because he's excited to share with you what the plan is. But I will say that this year is about, as Rob mentioned, the foundation of the go-to-market transformation was set last year. The fundamentals of what he and team wanted to accomplish, foundation was set. He had an incredible kickoff the first time in 8 years at PTC, we had one a couple of weeks ago. And you could feel the energy and excitement around now let's execute across the Q4 momentum. Let's repeat it. Let's make sure it's consistent. Let's get the messaging consistent, let's get the C-level messaging and acknowledgment consistent. And I see Rob and the go-to-market team as let's keep repeating and scaling and making this durable. But I'll let Rob talk about exactly what he's thinking about as he enters this year?

Yes. So thanks for the question. As you know, we did do that alignment by vertical and industry, which was a really important move to set us up for growth. And that alone, just coming through that as the team did and being able to deliver in the 3 quarters that had happened was an incredible accomplishment on its own. As Neil just mentioned, we had our first global kickoff [ at which ], by the way, we had our partners in the room for the first time. So side by side, getting the message unfiltered directly at the same time, which was a stated goal of ours to bring the partner community closer and to expand our reach through our SIs. So that was a great start to the year. And what we have this year that we didn't have last year was that all of that potential disruption is out of the way. So this year, we can make all of our efforts fixed on elevating the message, which we talked about, we have this -- a way to get now to the C level that we didn't before. To tell a story there that I think will definitely resonate and has already tested that in Q4. We're starting to diffuse that through our customers and also through our go-to-market organization. We're reaching out to our SIs in ways we hadn't before and not only through, of course, inviting them to our kickoff, but doing it in a more methodical way where there's a great opportunity for them, for our mutual customers and for us to benefit. And now we're going to start to think about how we feather AI into our talk tracks along the vertical, so we can have much more specific messaging that resonates better by industry, and we think will create better traction and better win rates.

Your next question comes from Jay Vleeschhouwer with Griffin Securities.

Neil, you used 2 of my favorite words, road map execution. And it's interesting as you said that, because for the last number of years, PTC has, I think, done well in that regard, particularly with regard to Creo and Windchill, hence the share gain for each. So what is it from here that you mean precisely with regard to additional improvements in that execution? And how does it tie into the multi-solution 3-letter acronym type sales that you're trying to do? And then a quick one for Kristian. Since you noted the record increase in RPO. Could you comment as well on current RPO? How that looks sequentially or year-over-year?

Let me take the front end. So Jay, thanks for the question. I would say that, yes, the execution for 40 years of this company around building great products has gotten us this far. And what I think Jon Stevenson, who you'll soon meet, is aligned towards doing in collaboration with his colleagues across the other functions is as an example, with Windchill, and you'll see this, Jay. The execution around a new UI/UX that actually end users will adopt more and be able to think about how to use product data more available across the enterprise, is something that we're executing towards, and Jon is putting just want to make sure it happens on time, it happens before customers and our sales team to even ask for it in urgency, right? Because we know that, that is a need. So just the rigor around making sure road map items result in customer value and Rob's team can actually think about the value that they could get from a sales team perspective. That is actually an element of what we've done in alignment that is newer to the company than the last 10 years, I would say. And it's got really good value already. That's point number one. Number two is on the AI initiatives. So you're seeing a lot of announcements coming out, and part of it is because we've been working with our customers a lot on POCs and beta to make sure we embed AI into our core products. And you're going to see Codebeamer, Windchill, you saw Arena, ServiceMax, Onshape. You're going to see this continuous flow of execution of road map that is aligned to how does AI, with this incredible contextual data that we've got in our core systems, give benefit and outcomes to our customers that no one else can provide to that customer other than PTC. And that's the area where Jon is like pushing on very aggressively. He was in Israel last week. And really to summarize this, Jay, making sure that teams are aligned to execute that AI road map in conjunction with the Intelligent Product Lifecycle for our core products that give real value to our end customers across the core capabilities we got. Kristian?

Jay, thanks. In terms of the current portion of the RPO, I think you'll see in the K when it comes out that approximately 55% of the total RPO we'd expect to recognize over the next 12 months.

[Operator Instructions] Your next question comes from Tyler Radke with Citi.

Congrats on all the announcements here. Neil, maybe a big picture for you. I mean, clearly, the divestiture of the IoT business, the buyback in terms of allocating a lot of capital back towards PTC, really seems to indicate you're doubling down on the core CAD and PLM aspects of the business. Like how do you think about where the growth of this business could go over time? What are sort of the key levers you need to see for this business to get back into the double digits?

Yes. So look, the good news here, Tyler, is that we're building momentum towards putting all the foundational layers to come and create a repeatable way to say we're going to consistently and sustainably continue to grow net new ARR, right? And the first part of that decision process and the foundation laying was centering the student body and now the customer messaging around this disciplined and innovative Intelligent Product Lifecycle vision. And that's resonating with customers. It resonated in Q4. And as you heard Rob say, he's going to make it resonate even more over the course of this year. So setting the strategy and vision was critical. Setting the student body directing towards that has been critical. Setting the foundation of all the practices and businesses has been critical. And now the cleaning up of all the focus of the business being put right into this vision that we've got versus the IoT businesses is setting us up for building on our already momentum that we saw last year. But in this course of this year, Tyler, to make sure we execute across all those things that we are super jazzed about executing towards. And so what I think the good news here is that the ingredients of being able to answer a question and the process and progress that we're making on those ingredients have moved materially forward from 12 months last year, right? This year is important to repeat that and make it durable. And at that point, we'll be able to come back and say, "Look, here's the durable growth rate for the business." But we're focused on making sure the underpinnings are taken care of. And then we know that the results will speak for themselves over time.

There are no further questions at this time. I'll now turn the call back over to Neil for any closing remarks.

Thank you all for joining. We appreciate it. A number of us will be on the road [ hitting ] the investor conferences, and we look forward to seeing some of you there. And again, thank you for your support and participation in today's call. Thank you.

This concludes today's conference. Thank you for participating. You may now disconnect.