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Just if I could. In the fourth quarter, we actually did transactions with 5 auto OEMs. The big one with Volkswagen and then smaller, in some cases, put into [ sort ] type transactions with other global OEMs. And at least 3 of those, we have no meaningful CAD, PLM or ALM business with prior to this Codebeamer win.
So I mean, certainly, we can upsell from the ALM position we had and sometimes from the PLM position. But what's really exciting is that we're knocking down big name new logos that we have no previous relationship with.
strong oem auto deaks un ALM
Transcript
2023 Q4
6 Nov 23
Great. Kind of a follow-up on the Codebeamer strength, this momentum that we're seeing. And then with the Volvo deal, I don't know if any of us really knew what PTC was doing in ALM 2 or 3 years ago.
So when I think about the Codebeamer pipeline and the ALM strength, how much of this is maybe from existing customers looking to upgrade existing legacy ALM products? Versus wins and displacements of other tools versus customers who may not even have an ALM product for, if that makes sense?
Neil Barua
Yes.
Let me take the front end of this. Thanks for the question. We indicated in a press release a large strategic relationship with Volkswagen across their entire enterprise where we are deploying code beamer to their enterprise users for all the use cases that we talked about.
VOLKSWAGEN deal
Transcript
2023 Q4
6 Nov 23
Let's take a quick look at how we did against our initial guidance for the year. Summarizing our fiscal '23 financial results. In a challenging market environment, we executed well in all 4 quarters and consistently delivered solid top and bottom line growth. With that, let me move on to fiscal '24 guidance.
acrual vs initial fy guidance
Transcript
2023 Q4
6 Nov 23
We expect to use substantially all of our free cash flow to pay down our debt this year and end the year with gross debt of approximately $1.7 billion. We've paused our share repurchase program, and we expect our diluted share count to increase by approximately 1 million shares in fiscal '24. Heading into fiscal '25, we'll revisit the prioritization of debt repay down -- of debt pay down and share repurchases.
capital allocation-- paying down debtr, so share count will increase
Transcript
2023 Q4
6 Nov 23
The majority of our collections occur in the first half of our fiscal year and Q4 is our lowest cash flow generation quarter. And on an annual basis, free cash flow is primarily a function of ARR rather than revenue. Q4 revenue of $547 million increased $39 million or 8% year-over-year and was up 6% on a constant currency basis.
fcf cadence
Transcript
2023 Q4
6 Nov 23
As you will hear from Kristian, for fiscal '26, we are targeting ARR growth in the mid-teens and free cash flow of approximately $1 billion. If there is one takeaway from my comments today, it should be that I am singularly focused on leading PTC to execute to its full potential.
$1bn in 2026
Transcript
2023 Q4
6 Nov 23
In PLM, our ARR growth rate in Q4 was 34% or 15% organic with the incremental inorganic growth coming from ServiceMax. ARR growth in Q4 was primarily driven by Windchill, but supplemented by strong organic growth in ALM, thanks to Codebeamer.
plm 15%
Transcript
2023 Q4
6 Nov 23
We've been taking significant share in the PLM market and are well positioned going forward with our strength in core PLM with Windchill Arena, complemented by strong positions in the faster-growing ALM and SLM parts of the market. Wrapping up my comments then.
taking mkt sgare in plm
Transcript
2023 Q4
6 Nov 23
Next, let's look at ARR performance of our product groups on Slide 7. In CAD, we delivered 10% ARR growth in Q4.
cad 10%
Transcript
2023 Q4
6 Nov 23
Remember that ARR is the primary driver of cash flow.
ARR drives fcf
Transcript
2023 Q4
6 Nov 23
Within this context, the portion of business that we signed in Q4, but that did not start in Q4 or fiscal '23 was greater than we had modeled. Since ARR only kicks in when the subscription starts, Q4 ARR was $8 million lower than we had modeled, while deferred ARR is consequently $8 million higher. With this influx, our total deferred ARR is now $20 million higher than it was at the beginning of fiscal '23. Kristian will explain that because of this added strength in deferred ARR, we are now guiding ARR to grow 11% to 14% in fiscal '24, higher than the 10% to 14% growth range we discussed previously.
ARR 2024 guidance hike
Transcript
2023 Q4
6 Nov 23
Despite a challenging economy, we delivered a seventh consecutive year of double-digit top line growth with ARR growing 23%, 13% organically and revenue crossing the $2 billion threshold. And on the bottom line, we delivered 41% growth in free cash flow. This performance is a great stepping off point for me as I hand the reins of the company to Neil Barua going forward.
arr up 13% yoy
Transcript
2023 Q4
6 Nov 23
For fiscal '24, we expect constant currency ARR to grow from $1.979 billion to $2.19 billion to $2.25 billion, which corresponds to growth of 11% to 14%.
2024 ARR guide
Transcript
2023 Q4
3 Nov 23
Though the manufacturing PMIs continue to indicate a sluggish environment globally, our topline ARR continues to show good resilience. In Q3, we saw broad-based ARR strength across all product groups and geographies and our churn results remain good.
manu pmi
Transcript
2023 Q3
2 Aug 23
Codebeamer is a much newer kind of cutting-edge product. It's got great functionality, great usability supports all the Agile principles that embedded software developers also want to adopt now, but at the same time, provides the regulatory framework that they need to develop against.
So, it's a great product.
I think it's best in class and it's a hot market.
So, we've been doing very well with these big auto companies that you would all know, you all know the names of. And I think we're going to land a few more here in the coming quarters.
But -- it's certainly been accretive. I said last quarter, if you remember, that we had 13% growth, but if you'd let me look at Codebeamer a little differently, it had been 14 and now this quarter is 14%.
So, you see that Codebeamer while not a big business, is performing well enough to lift the organic business up by as much as 100 basis points.
Operator
codebeamer/ALM doing well in auto
Transcript
2023 Q3
1 Aug 23
I think you would agree, we have a very strong PLM position and we've been taking share for years with PLM.
In fact, you suggested it went from third place to second place and then I think we've gone the first place.
So, PLM is a strength and I don't see that dying anytime soon.
PLM is a ptc strength
Transcript
2023 Q3
1 Aug 23
Got it. And then sorry, if I could just maybe quickly ask just in terms of this year's constant currency organic ARR growth guidance of 13%. How sustainable is that level of growth sort of going forward into FY 2024?
Kristian Talvitie
Yes, I mean, again, we're not really going to guide fiscal 2024 at this point, but we have mid-teens growth aspirations over the midterm.
I think that Jim did a great job kind of outlining a lot of the various growth drivers that help stack up to delivering on that kind of growth, then you have to overlay the macro and understand how that's impacting in any given period.
But as we said, I'd be surprised if we had a -- I wouldn't be surprised if we had a similar guidance set up to last year.
So, we think that whatever low to mid-teens growth is sustainable.
2024 guidance, again
Transcript
2023 Q3
1 Aug 23
But we provided a fairly wide guidance range, 10% to 14% as we started fiscal 2023 that allowed for considerable amount of macro uncertainty. We've certainly seen that and I think that we would look for -- I wouldn't be surprised to see a similar setup as we start next year.
similar set up for 2024 10-14? ARR organic rev growth?
Transcript
2023 Q3
1 Aug 23
margin expansion
3 margin expansion
Transcript
2023 Q3
1 Aug 23
SaaS transformation that should provide a multiyear growth tailwind.
And as Jim explained, it's a massive oversimplification to focus only on SaaS as the growth driver for PTC.
We continue to benefit from the cumulative layers of PTC-specific growth drivers, including driving customer expansion through cross-selling our unique portfoli
2. SaaS and cross selling
Transcript
2023 Q3
1 Aug 23