Good evening, ladies and gentlemen. Thank you for standing by. And welcome to PTC Inc.'s 2026 First Quarter Conference Call. Following the presentation, the conference will be open for questions. I would now like to turn the call over to Matthew Shimao, PTC Inc.'s head of investor relations. Please go ahead.

Thank you, operator, and welcome to PTC Inc.'s first quarter 2026 conference call. On the call today are Neil Barua, Chief Executive Officer; Jen DeRico, 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 Inc. 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 Inc.'s annual report on Form 10-K, Form 10-Q, and other filings with the US 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, 02/04/2026, and PTC Inc. assumes no obligation to update these forward-looking statements. During the call, PTC Inc. 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 Inc.'s Chief Executive Officer, Neil Barua.

Thank you, Matthew, and good afternoon, everyone. I'll begin today by welcoming Jen DeRico to her first PTC Inc. earnings call as our new CFO. I'm confident she'll be a great CFO for PTC Inc. and a strong partner to our investor community. Turning to our results, we delivered a solid 2026. We grew constant currency ARR 9% excluding Kepware and ThingWorx, and 8.4% including them. And we grew free cash flow 13% year over year. These results reinforce our confidence in the transformation we are driving and the demand we are capturing. Our divestiture of Kepware and ThingWorx is progressing, and we are on track to close on or before April 1. Before discussing execution in the quarter, I want to take a step back and talk about our transformation and my optimism for the road ahead. Every transformation has an important turning the corner phase. The end goal is still ahead, but you start to see collective forward momentum across the most important elements of the transformation. This is where PTC Inc. sits today. We see it clearly in the following ways: Number one, accelerating product roadmap releases; two, record deferred ARR under contract; three, higher seller productivity; four, customer commitments that are strategic and increasingly span the full life cycle; and five, consistent customer feedback that our intelligent product life cycle vision resonates with what they need. To that end, how our customers develop products is changing significantly. Products are becoming more complex, more software-driven, and more regulated. At the same time, development cycles are compressing, competition is increasing, supply chains are fragmenting, and the workforce is evolving to favor modern digital-first systems and processes. The traditional product life cycle built on disconnected tools, siloed data, and manual processes simply can't keep up. That is why the…

Thanks, Neil, and hello, everyone. I'm excited and honored to join the PTC Inc. team at this significant time in the company's transformation. Before turning to our Q1 results, I thought I'd share my initial observations and key priorities. I'm impressed by the PTC Inc. team and how our intelligent product lifecycle vision is taking hold with customers. As Neil highlighted, product companies want to leverage AI for their high-value use cases and workflows. The companies that succeed will be the ones that connect product data across the entire life cycle and then leverage that foundation to push AI-driven intelligence. It's an exciting time because PTC Inc. is well-positioned to help our customers address this challenge. In terms of my key priorities, I look forward to partnering with Neil and the leadership team to help PTC Inc. capture its growth opportunity, maintain strong financial discipline, and create meaningful value for our stakeholders. I'm committed to helping the investor community understand and value our business, and I'm looking forward to engaging with you. Now let's turn to our fiscal Q1 2026 financial results. At the end of Q1, our constant currency ARR excluding Kepware and ThingWorx was $2.341 billion, up 9% year over year. Including Kepware and ThingWorx, our constant currency ARR was $2.5 billion, up 8.4% year over year. Our Q1 operating cash flow and free cash flow both grew 13% year over year. Q1 free cash flow of $267 million included $10 million of Kepware and ThingWorx divestiture costs. Finally, on the divestiture, we are still targeting a close on or before April 1, and there are no material changes to the figures we provided last quarter. Turning to share repurchases, as previously guided, we repurchased $200 million of common stock in Q1 under our $2 billion share repurchase…

At this time, if you would like to ask a question, press star then the number one on your telephone keypad. To withdraw your question, simply press 1 again. Please limit yourself to one question only. If you have additional questions, please return to the queue. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Yun Kim with Loop Capital Market. Please go ahead.

Alright. Great. Thank you. Congrats on a solid quarter, Neil, and welcome aboard, Jen. Since this is your first time, I'll ask a question to Jen first. So Q4 is the first quarter when we can see ARR from those deferred ARR deals. What level of visibility do you have on that, if you can quantify that if you can? What are, for instance, what are some of the variables behind those ramp or deferred ARR deals getting recognized in Q4? And is the timing of that ramp related to billing, then would it affect cash flow? Thanks.

Yun, thanks for the question. And Jen will add to my upfront. But since she's four weeks in, let me take the upfront on the dynamics of the demand capture, and then she could talk about some of the technicalities if I don't cover it. So, you know, again, I think you heard, and thank you for the acknowledgment. We feel really good about the progress of our go-to-market transformation, and it's showing up now in two quarters of demand capture that is now relating to, you know, the amount of deferred revenue deferred ARR that you spoke about in Q4. That's about triple what we had last Q4 entering. And double the deferred ARR that we're building starting in 2027 that we had coming into this year. So Rob and the go-to-market team are really doing a lot of great work on the demand capture. And the crux of the deferred ARR is due to the fact that we're winning strategic cross-product and in some cases, and in many cases, on some product lines, competitive displacements. And so, you know, we're taking the commitment, which is committed dollars from the customer. I'm cognizant that it's not showing up right now in the in-quarter, but we're very positive about how it's starting to build ARR in Q1 and as we guide around Q2, how it'll impact Q4 in a more meaningful way than it did last year and also into the following year. And it's all to do with the implementation cycles of our customers. And we feel good about it because the commitment's there, it's contracted. And it's set to come. Jen, anything to add?

I think you hit it, Neil. Thanks.

Alright. Thank you so much.

Your next question comes from the line of Joseph D. Vruwink with Baird. Please go ahead.

Great. Thanks for my question. And, Jen, welcome. At the big event hosted by PTC Inc.'s user community about this time last year, there was some, I think, foreshadowing by PTC Inc. about AI capabilities that would get added to Windchill and the parts management areas. And at the time, customers were really excited about this. I think that idea as a product is what PTC Inc. is now starting to come out with. I think it was released last week. I guess my question related to this, there's obviously been a lot of AI releases from PTC Inc. across all the core products over the past year, and not diminishing any of those. But are we maybe starting to see some that could prove more material in nature and this is gonna start to register in a more noticeable way on demand decisions over the next year?

So thanks for the question, Joseph, and thanks for acknowledging the really good progress that we're making around our AI strategy. In concert with what customers really need. And as you noted here, you know, our products are mission-critical enterprise systems of records across the life cycle. And as you heard last year at the PTC Inc. user group, the preponderance of our customers are now really wanting us to embed these AI releases as you noted. The Windchill AI parts rationalization, we also did a CodeBeamer AI release as well, and many others that are accelerating over the course of this year, which is really embedding AI capabilities to advise and assist and over time automate workflows within these systems of records that we are very well attuned to understand and train the models around it. So we're thrilled about the progress. Our customers are even more thrilled that we have built these and now there's a rapid iteration of releases to even make these more consumable over time. So we feel good about where we are around our strategy. We feel very excited about the criticality of PTC Inc. to deliver AI to our customers given the strength and the complexity of our system of records within our customer environment. In terms of the impact of when, you know, Jen could start talking about the P&L impact in terms of when we'll see a lift. I'd say right now it's immaterial in terms of how we think about the economic till coming into the company. But as these releases start taking hold and they move from POCs to scale deployments, over the course of the next few years, this should be something we'll be talking to you about and others around a real economic driver of the business. Thank you.

Your next question comes from the line of Adam Charles Borg with Stifel. Please go ahead.

Awesome. And thanks for taking the question. Maybe just on Creo and Windchill. And as we think about those growth rates, any way to parse out the mix of growth coming from expansion versus competitive displacement? And given the new go-to-market promotions that seem to be having some success, what's the opportunity to drive more competitive displacement front? Thanks so much.

Yeah. Let me start this, and Rob could add. Given he's really driving the team in a really disciplined manner the way he said he was going to when he started about twelve months ago. And we're very proud of the progress that team has made. What I'll say is around Windchill, which we don't break out the exact growth rate of Windchill. It's an aggregated PLM number as you might know, Adam. We're very enthused about the Windchill capabilities and the acceptance and the growth rates around Windchill as a standalone product in addition to, by the way, Windchill Plus, where we're seeing really strong traction. Creo, as you noted, continues to be a strong grower, a steady grower, and we feel good about its competitive dynamic in the CAD market. In addition to the fact that we have an amazing Onshape capability that is also starting to be a very strong competitive takeaway off of some of the competitors on their estate. So we feel good about CAD. In terms of PLM, in terms of the mix around expansion versus competitive displacement, I'd still say, Adam, that the significance is still around expansion. And even in expansion, there's competitive displacements that's happening where customers are giving us their entire estate now of take all the disparate PLM systems and put it on Windchill. So you saw some of the appendix slides you're starting to see and we're starting to see that being more of the types of deals we're seeing. Part of it is because the customers are understanding to get the benefit of AI, you need contextual product data that's put in one place in a system of record like Windchill so this advantages customers to expand with Windchill and then build in parallel with us some of the AI capabilities. But we are also lastly seeing competitive displacements, as I mentioned. And we're continuing to see more of that happen over the course of this year as we look at the pipeline. Rob?

Yeah. The split's correct that we get the majority from expansion, but there is actual growth and accelerated growth in competitive displacement. And so we feel really good about that as a kind of a next step grower for us.

Great. Thanks again.

Your next question comes from the line of Ken Wong with Oppenheimer. Please go ahead.

Jen?

One moment for Ken. Ken Wong, your line is open.

Hey, Ken.

Operator, let's go to the next. I'm back to Ken.

Your next question comes from the line of Matthew Hedberg with RBC Capital Markets. Please go ahead.

Congrats. I know the software environment seems a bit dicey these days, but it's great to see the consistent results out of PTC Inc. I guess, Neil, I wanted to ask you you just you just talked about Windchill a second I guess I was curious if if you could talk a little bit more specifically on Windchill Plus. Creo Plus, just kind of the broad SaaS portfolio. You know, are you are you starting to see increased customer demand for SaaS? And and, you know, in those instances, are you seeing, you know, customers spend spend go even higher in in in those situations?

Yes. So thanks for the question. And we've been very we've been very practical and also transparent with all of you around our journey around building our SaaS momentum. And I'll take first the board in the cloud solutions that we've got, and in particular, Onshape Arena, ServiceMax. And we feel good about to in some cases, great about the momentum and the adoption of those capabilities in several competitive that are happening across the three of those strong portfolios in addition to the AI capabilities we're building on top of it. Terms of your question on Windchill Plus and Creo Plus, we're having a bang up and we did have a bang up last year in terms of the momentum building for Windchill Plus. We had another strong demand capture quarter for Windchill Plus. If not record-breaking, we have plenty more to go, and I wanna make sure I think Rob and I are measured about that we've been saying for a while that the dam has not broken where the entire market is flipping to our plus platform overnight. But we have been building momentum. We are working towards making sure we meet the customers where they are. The good news story is the following, and I've been saying this for two years consistently. SaaS starts working for Windchill Plus and Creo Plus when they're scaled implementations with a great experience with a back-end experience that's good, and the customers are happy. We're starting to see that. And we're gonna leverage that. We're gonna continue to build on the momentum. And so we feel really strongly about our position on SaaS. We feel like that will continue to be a growth driver. And to your last question around Lyft on pricing, yes, we are seeing the similar sort of Lyft that we've been saying around the one and a half to two and a half times kinda lift in terms of on-prem to SaaS lift on on ARR.

Thanks, Neil.

Your next question comes from the line of Joshua Tilton with Wolfe Research. Please go ahead.

Hey, guys. Can you hear me?

Yep.

Great. Thanks for sneaking me in here. I appreciate all the commentary on the improvement in sales productivity. But when we kinda, like, dig a little bit deeper in the numbers, it looks like the channel drove over 80% of net new ARR in the quarter. So I'm just trying to understand, like, are there any one-offs in the direct business that we need to understand? Is this tied to the deferred ARR dynamic? And maybe, you know, when can we start to see the direct business maybe contribute at a similar level to the channel? Going forward. Thanks.

So I think what we're seeing right now is good momentum in both the channel and the direct. What you're seeing actually in the numbers, in particular this past quarter, one large deal does have an ability to influence this. And oftentimes, with a large deal, you have both the channel and the direct. And ultimately, it's about customer preference and how they want that fulfilled. Ultimately, that's all that's happening in those numbers right now. You can add Rob.

Yeah, I mean, as we've mentioned, you know, in prior conversations, we're working very hard to more deeply engage with partners on this. So to create an environment where we can allow that flexibility at the customer and not have a battle that's direct against the channel but working together to fulfill at the customer's request. So we think you might see that from time to time. We did have a larger deal this quarter that fit that picture. But you might see it again in the future, but it's not in any way some kind of visibility into weakness in DIRECT. We work very closely together.

And lastly, I want to make sure we're very clear about this. The energy and enthusiasm that turning the corner is around the actual indication and the contracted commitments that are building predominantly deferred ARR. So we feel really strongly about the go-to-market transfer. It's actually doing the thing that we need to do, which is capture customer demand. How it's showing up in Q1 in our guidance for Q2 has only got to do with timing. And the good news is this is committed capture. By the way, this is gonna show up all in another metric that you could look at. Not completely indicative of it is RPO and CRPO. You'll see in the queue but all of these metrics are leading us to make sure we all articulate that demand capture is strong. We gotta continue that. And as that happens, ARR over time becomes durable and multiyear in terms of the sustainability.

Makes sense. Maybe just to clarify one thing around that. Was there more deferred ARR added to the balance in 1Q than when you exited Q4?

Yes. There was. And just to reiterate what Neil said before, as we think about where we are, where we sit today versus one year ago, for Q4 2026, there's triple the amount of deferred ARR on the books for Q4 2026. And then in the same view, for 2027 is double for 2027 versus where there was last year for 2026.

Super helpful. Appreciate the clarity. Thanks so much.

Your next question comes from the line of Blair Harold Abernethy with Rosenblatt Securities. Please go ahead.

Thanks very much, guys, and welcome, Jen. Just on the go-to-market side again, I just wonder maybe Rob can shed some color on this. But, you know, in terms of new customer ads, what are you seeing out there in terms of interest in your portfolio? Is it skewed at all more towards the SaaS side? The SaaS products? And, also, maybe you could provide a little more color on this the startup aerospace and defense program. It looks like you've been winning some business there.

Yeah. So for a couple of the two questions. As it relates to the new business and new logos, we definitely as mentioned earlier, have had a nice run and an increase in our competitive displacement. So we're picking up what we would consider to be new logos in kind of the upmarket. As we bring on new customers, we default to cloud. So they're coming in in a cloud environment and it typically, you know, that's been working very well for us and for the customer who want to enter that way. As they reduce their customizations and the complexity in their own environment. And obviously, try to capture some of the benefits of being in cloud. Some of which are pretty obvious, others which will start to manifest in how AI is deployed. So yes, we're seeing good traction with customers coming in new. That is our default setting as we bring on new logos into the cloud. In defense, it's great that you notice that. You picked up on that. We have an opportunity there. We believe as we serve of the largest customers in the world, at the top of that stack we have an opportunity now to incubate at the lower. And we've seen great reception there. Certainly we always learn and get better every month, every quarter. But the initial response has been really positive there. And we have a number of ways to service that market as well. So feel like we're well positioned at both the top and the bottom. And hopefully we'll be able to report some great success stories that grew through there.

Great. Thanks very much.

Your next question comes from the line of Ken Wong with Oppenheimer. Please go ahead.

Hey. Can can you guys hear me?

Yeah.

Okay. Perfect. Appreciate, the the context around deferred ARR and and when some of that timing could pop up. When thinking through the unchanged fiscal year ARR guide and coupled with that commentary that it sounds like more is coming in Q4. Help us think through the seasonality if you could. I mean, is it is it basically gonna be even more back-end loaded than you guys were perhaps three months ago?

So I think right now, the way we think about it, as you heard me say in my prepared remarks, that we'll have a step up in Q3 and a larger step up in Q4. I would say it's similar to how we've been thinking about the business. Neil, you can correct me if I'm wrong prior. But overall, the shape of the curve is very similar to what we thought about when we guided for the full year.

Okay. Perfect. Thanks a lot, Jen.

Your next question comes from the line of Daniel Jester with BMO Capital Markets. Please go ahead.

Hey. Great. Good evening. Thank you for taking my question. Maybe you know, in the slide deck, there was a a good story about ServiceMax and an expansion there. You know, last year was maybe a little bit of a tougher year for ServiceMax. And so maybe just an update about what we're what we're seeing there and in terms of the cross-sell opportunity. For fiscal 2026. Thank you so much.

Yeah. Let me start, and Rob could add if if I miss anything. Look. As as we've mentioned a few times starting last year, we've been working through very specific churn events in ServiceMax for a number of quarters now. As I mentioned, I think last call that we've got some still residual churn that kind of hit us in Q1. And most of it, we're trying to work through the system by the end of this quarter. That being said, a ray of sunshine in terms of some green shoots, we've been talking about, like, the cross-sell opportunity you saw you noted the one in the appendix. We've had some good strong demand capture, as we're calling it, i.e., contractual commitments of ServiceMax that was very encouraging as we saw. We need that replicated over the next number of quarters. The end of Q4 and throughout the entirety of Q1. We obviously wanna ensure that churn is mitigated versus what we've seen in prior quarters. And lastly, the integration of ServiceMax into the intelligent product life cycle and in particular, how our AI strategy allows for agents to work across our systems of record where we have a very offer in ServiceMax, we believe is a competitive differentiation, in particular with some of these competitive displacements when customers are giving us PLM. Part of it is to do with the fact that we actually do have such a strong customer record at ServiceMax and ultimately in that AI world where it advantage. So not out of the woods, but making progress and, you know, we're staying in in real focus to make sure we continue on some of the buildup of some of those green shoots that we're seeing.

Yeah. And as part of the alignment, we go vertical and start to look at how we rebalance just the go-to-market teams, we've made this a very important part of our elevated messaging. And so it's being brought to market more widely. In addition, we attacked the level of really instituted as part of the comp plans in a way make sure that everybody's got some incentive to bring this in front of the customers. So in addition to the benefit of the customer, there's internal benefits also. So we're trying to make sure the whole company is aligned to get the message out.

That's great. Thank you so much.

Your next question comes from the line of Jason Vincent Celino with KeyBanc Capital Markets. Please go ahead.

Hi. Thanks for taking my question. Sorry to belabor. Another ARR question, but this actually relates to the Q2 ARR guide. Know there's an implied decline in net new dollars added for Q2. Did you see any deals, you know, from the Q2 pipeline closed earlier in Q1? Or are you expecting more of the deals in Q2 to also have this bigger deferred component? Thanks.

It's a great question, Jason. This is all to do with our assumption as we sit here today around how these deals will come into the in-quarter start affecting ARR for that. This has nothing to do with demand being lesser than the momentum that we're talking about. It has simply to do with the structuring and our assumption of that being the case. Quite frankly, it is another quarter where we believe we will continue to build on the deferred ARR to make this a durable multiyear sustainable growth engine going forward.

Perfect. Thanks.

Your next question comes from the line of Sitikantha Panigrahi with Mizuho. Please go ahead.

Thanks for taking my question. Congrats, Jen, and look forward to working with you. So it's good to see some of the initiative on AI side you are doing and and also buyback. But, Neil, I I wanna ask about the macro that you talked about earlier. A little bit. You're conservative there. What kind of trend are you seeing in Q1, and what's assumed in your guidance? And and specifically, if you could give some color in terms of vertical, if you are seeing anywhere strength or weakness there.

Yeah. You you know, Rob could add about the vertical piece but just broadly, we've been in a very difficult macro. We've talked about this for many years now for a long time. And we are still delivering and capturing the types of results that we're talking about, particularly on the demand cap commentary that we gave. That is across regions, across verticals. We're seeing that strength. And the reason for it, despite the macro having so much uncertainty and volatility, despite policies being uncertain. Is because as an example, today, we had one of the larger industrial manufacturers in all of Europe join us at the CXC. And while they are dealing with so much change, they need to modernize. And they need to make sure prioritization of modernizing and creating a strong product data foundation, in this case, Windchill and the expanse of Windchill is what they're looking at with the additional CodeBeamer. To make sure they take advantage of AI as they think about their multiyear journey and competitiveness. So we feel good that even in this environment, our end customers, as you know, Sitikantha has not modernized as fast as almost every other end market. Of companies, they are getting the urgency to move. And now with this intelligent product life cycle, it's a comprehensive holistic story for them to actually be competitive with technology provided by PTC Inc.

Yeah. Just in terms of the actual strength within the verticals of the geographies, there's while there may be in a particular vertical a geography that has performed, some other geography has stepped up to outperform. And so if you look across the verticals, they're all our big five are all performing fairly well. And then if you look at any geography, there's no geography that has just been depressed. If they're down in one industry, they pick up in another. And so across our three or four biggest geographies, and across the five verticals, we have some pretty good numbers. We feel like every one of those is a place that has some upside.

Great. Thank you both.

Your next question comes from the line of Nay Soe Naing with Berenberg. Please go ahead.

Hello. Hi. Thank you for taking my question. I'm, again, looking forward to working with you. My question is on the deferred ARR. I think, Neil, you you you attributed to the fact that the booking to ARR conversion will, you know, begin Q4 as a result of implementation of customers. I was wondering if you could share with us how much visibility of control you have over that implementation timeline of the customer? Is there any potential risk that the implementation process might take longer or on the on the on the other on the flip side, it could it could be shorter than the Q4 that's coming up. Thank you.

Yeah. So I I was sorry. I was a little unclear, but I wanna make sure I mean, your question was clear. The audio was a little low. But just in terms of the deferred ARR, this is Rob. These are this is contractual commitment. So when we engage and sign these contracts, these are contractually committed amounts of ARR. That's what we hear Neil talk about, the durability and the predictability of the business. So they have a great incentive to be on time in their implementation. But if if they're not, that ARR comes. So we believe that in addition to obviously the predictability, the benefit to the customer and the way we've contracted is that it's allowing them time to ensure that they are aligned to the cycle of the contract. And so why we're also excited about how we've had these quarters and what we call demand capture is because in addition to timing them appropriately, we've done them on the proper commercial conditions, not in any way try to strain the deal by pulling it forward just to hit a current quarter. It doesn't match the implementation cycle or market conditions in those out years. And so these are contractually obligated they'll hit in these quarters. We are hoping and we're planning to be fully aligned with their implementations. And in addition to that, hopefully as we get to those those out cycles, there's actually upside even in those.

Okay. That's super helpful.

Your next question comes from the line of Tyler Maverick Radke with Citi. Please go ahead.

Hi. Thanks for taking the question. So I know you've you've been asked you know, almost every question on deferred ARR, but I I guess I was just wondering if if you could help us understand you know, I guess, the magnitude in which that surprised you in in the quarter and then how that changes for the year. Because because clearly, you're you're you're seeing some good things on the rep productivity side. But you know, you came in a little bit below the high end of the guidance. And then that something you're just contemplating or risk adjusting more, in the outlook? It looked like there was on the the net new ARR. For Q2. And and then, sorry, just to clarify, if you think about the the stacking of these ramped ARR deals, I think it implies that your overall ARR growth should reaccelerate in Q4, and if that's the case, would would you expect that to to be durable just given the the visibility you have? Thank you.

Yes, Tyler. Thanks for the question. I just want to take one step back. The work that we're we've done and undertaken around go-to-market transformation, the hard work that we did upfront, and the the the precision and process that we've undertaken for the last twelve months and we're continuing on going forward this year and into next. In addition to product innovation that we're talking about AI, is around bringing PTC Inc. back to a consistent demand capture environment by which we're winning and engaging in strategic cross-product deals across the core priorities that actually build towards this intelligent product life cycle and so fundamental to our customers. And so that process that Rob and CK and the go-to-market team started off twelve months ago, is showing the fruits of all that process in demand capture that happened in Q4 and in Q1. And as we alluded to, we intend to continue that momentum into Q2. That is not showing up yet in net new ARR. And the way we showed you the guidance for Q1, was clearly not a surprise in which we gave you the range because we know that the whole game is build a durable, accelerating growth company. And the way you do that is by capturing great demand in a quality deal that fills deferred ARR and allows churn to continue to stay low keeps building new ACV into the quarter that we're playing in. And we believe in summary, that that inflection the turning the corner, and the turn the corner starts becoming more apparent in Q4 of this year. And substantially into 2027 and 2028. And that's what we're playing for Tyler, and that's the results and the work that we're doing at this current time just so we're being transparent with all of you. Thank you.

Your next question comes from the line of Jay Vleeschhouwer with Griffin Securities. Please go ahead.

Thank you. Good evening. Neil, your references this evening to large transactions coming on top of similar comments back in Q4 when you clearly had a large number of large transactions leaves you to ask the following. And there's quite a bit of deja vu here for me, which is if you think about ANSYS, you know, six, seven, eight years ago, they too had gone through a significant go-to-market change. They too had evolved and broadened their portfolio. So there's some similarities here. That lead me to ask if you are anticipating a fundamental change in your deal profile or propensity that you will start seeing more frequently the number of 8-figure transactions as as you did in Q4 and as they did over a number of years. Then secondly, I can't help asking about your presence of CES last month, which was quite significant. I think the almost the entire c-level team seemed to be there. There was a significant automotive flavor to your presence there, particularly around ALM and and Windchill. The question is, do you think that you can broaden your momentum in auto beyond the, the tip of the spear that ALM has been giving you plus some so plus some Windchill so that you can, in fact, start seeing a broader, more impactful growth or share contribution in auto. Know, as you've done, for example, at Toyota, Ford, VW, etcetera, etcetera?

Yeah, Jay. Thanks for the question. And and let me start with CES. So we were more than proud, but more than proud we were very enthused by the reception we got at the first ever CES that PTC Inc. has been involved in. And not only from automotive, but Jay, you were there, you know, you saw all around our booth was industrial manufacturers around the world that actually came to our booth as executives asking of us how can we deploy more of Windchill with? Most of them being our customers already Jay, which you're probably familiar with, but really trying to understand, wait a second. Now you have something called CodeBeamer. Now what are you doing with AI? How can we supercharge our Windchill base or our Creo base? ServiceMax in some cases? What can we do? And and that was just a really great pump your chest moment for PTC Inc. around, we're in the big stage now. We deserve it. And we're at the fundamental level of transforming these really amazing companies around the world. Including automotive, a lot of industrial manufacturers as well. On automotive, I will say, right now, CodeBeamer is the tip of the spear. That tip of the spear is very substantial for us. And there's plenty more to go in terms of CodeBeamer displacements, not only manual processes, but also competitive solutions. As you see that product is really gaining scale or adding CodeBeamer AI functionality, which the market is really energized by. So, you know, we're we're happy to get all of automotive onto CodeBeamer and that that's we're marching towards that end for what it's worth. Same on Windchill with automotive. We are continuing to see an ability for Windchill while in some accounts in automotive, it is there as you know, Jay, we're seeing this theme of, like, let's consolidate on Windchill. Let's take all the disparate PLM system and put it all onto Windchill, and we're gonna continue to go down that path. Lastly, ServiceMax. So Lamborghini was a marquee customer at our booth. They're deploying ServiceMax now that's tied back into their Windchill and so that they could deploy the right parts and services to their end customers faster. We're gonna go down that path as well. Ultimately, one day, we're gonna talk about CAD, but right now, we feel really good about in automotive. ALM, PLM, over time as we're seeing server logistics our ServiceMax product and SOM suite of products there. Bob, anything to add?

Only thing I'd say is in addition, of course, we we have take down the rest of the automotive industry when it comes to our ALM. We are seeing it start to go into other industries. It's not we have not made any kind of deliberate decision to knock off that. We actually have customers now exploring it and actually in places that you wouldn't even imagine. So we're pretty excited about the possibilities there. And there's obviously a huge white space outside. And your first question, Jay, around are you seeing this dynamic of cross-product larger scale deals? And you know, these large scale deals, they take a lot of effort, timing, you know, is always an art, and we have one of the best artists in the world and Rob kinda with his team landing those. So but but a big part of what has been the up-level messaging that we've been talking about the going to partners, getting to the GSIs, revealing what you know, Joe Jay, I think is, like, the greatness of PTC Inc., the importance of PTC Inc. to be at the same system of record as the big players you know, worldwide in software that's beginning to happen. And the more we get there, the more we're starting to construct these larger deals. When they come in, it's gonna be on Rob, but we're enthused about the fact that they're starting to actually build into the pipeline and we're looking at very optimistic ways in which how we could close that over the next number of years.

Thank you very much.

Your next question comes from the line of Joshua Tilton with Wolfe Research. Please go ahead.

Hey, guys. Thanks for thanks for sneaking me in again. And I I I hate to I hate to ask one more on deferred ARR, but if I kinda you know, sum up all the takes of the questions that we're getting sent on the call, I think some of us have, you know, remembering or PTSD whatever you wanna call it from prior communication around deferred ARR that kinda didn't pan out. As we were all hoping for in the year. And I and I'm just I'm I guess what I'm asking, is there anything that you can tell us or give us to instill confidence that this deferred ARR balance will come through in the fourth quarter? And then on top of that, is there a way to think about how much of that balance is currently baked into the guidance? Thanks, guys.

Yeah. So so let me just on the confidence level, and again, can only speak about what we've been doing, since we've been transforming the business across all fronts. And I I wanna make one reference back to twelve months ago when we talked about all the levels of what we're doing in go-to-market transition. One of it was far tighter linkage between sales and customer success. And Rob made plenty of organizational decisions process decisions to align the two. And the reason why that's important answering your question is, customer success i.e., the cut the and that team has the implementation expertise when a deal is underway, they're the ones that actually advise the customer around here's what we see as the way in which the technology can actually be implemented. In addition to a third party. That linkage is tighter. And because it's tighter, we believe that in the contracting process, it's eyes wide open around when the implementation should occur when the customer should pay for it, and what's the right thing to do for the process of the actual project itself. And so we feel confident that we put the right diligence number one. And as far tighter linkages now than there was twelve months ago. Number two is know, I think Rob alluded to this. I wanna just punctuate it. Is we're doing deals to build a durable multiyear growth sustainable business, not telling the customer, if you let us maximize ARR for this quarter, you know, you'll get these certain attributes. We're doing the deals the way they should be the deal do the deals. And so the risk profile of a customer coming back and saying, the implementation schedule is different than what you said is low. Lower than I've seen. And at the end of the day, Rob's got a discipline that says, since we were transparent with you, it's in contract. You're gonna pay for it. So summary of all that long diatribe is that we feel little risk in that deferred ARR for you to have that PTSD of saying, that disappeared or moved out.

Love it. Thanks for the clarity. Really appreciate it.

That concludes our question and answer session. I will now turn the call back over to Neil Barua for closing remarks.

Thank you all for joining. We really appreciate the questions and the attention. We're gonna be on the road the next number of weeks, meeting in conferences and investors and we look forward to seeing you. And, again, thank you for joining the call.

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