PTC Inc at RBC Capital Markets Global Technology, Internet, Media and Telecommunications Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That is a great overview. It gives us a lot to kind of drill into. So I guess, we've been talking about replatforming Windchill and Creo and Atlas for a little bit now. Where -- I don't recall if you've given like a real sort of defined time line for when you expect -- I know you're introducing SaaS services that are built on Atlas, but what is sort of the time frame today for kind of SaaS-ifying effectively Windchill and Creo on Atlas?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : So one of the things that struck me early last year, and you and I have talked about this and talked to Jim about this, this is a market, at least from a CAD and PLM perspective that is more reluctant to change -- change vendors. You guys had a number of large replacement deals earlier in last fiscal year that I think we're really exciting and I think, to me, spoke to how the market was increasingly viewing your leadership from a SaaS perspective, today, Onshape and Arena, but in the future, Atlas across the broader portfolio. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 16, 2021 / 7:00PM, PTC.OQ - PTC Inc at RBC Capital Markets Global Technology, Internet, Media and Telecommunications Conference (Virtual) And I know some of these things are -- they can be hard to predict. But what can you tell us about sort of the where PTC sits in sort of the thought leadership position within Windchill -- within CAD and PLM? And does this increase focus on SaaS, do you think open up some additional replacement deals that maybe customers are looking at you as the thought later at these days?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : New market opportunities, yes. I want to ask about kind of the -- within the digital thread business, we just spent a little bit time talking about core, and now on the growth side, I think works in Vuforia. You guys disclosed the growth rate of those businesses. And I believe it was mid-teens for 4Q. A lot of investors saw that as a bit of a disappointment relative to, sort of, I think, maybe prior views of these growth businesses. Can you help us better understand the outlook for this growth segment within digital thread? And there had been some headwinds to IoT, some of them are pandemic-related. How do we think about that business -- that subsegment of digital thread progressing over the course of fiscal '22?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : What are -- that's interesting. So when you sit sort of with your forecast have, what are some of the key components to drive that sort of like 20-ish growth from an exit rate perspective this year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 16, 2021 / 7:00PM, PTC.OQ - PTC Inc at RBC Capital Markets Global Technology, Internet, Media and Telecommunications Conference (Virtual)

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Got it. Okay. I want to -- before kind of pivoting over to the Velocity business, this is -- I guess, it's a somewhat related question, because it will have impact on sort of the reinvestment. But for those investors, I mean I've known PTC for years and years and years. And I think part of the pushback for investors now is like this seems like the right strategy, but it also feels like another wave of restructuring and change. And so to those people that worry about this is just another iteration of change and evolution, maybe just talk to us about the significance of this refocus, this restructuring and then the reinvestment to then, I think, reinvigorate really growth across the entire platform, let alone the digital thread business. But maybe -- I guess, the question, on the magnitude of disruption about this latest restructuring, how does this compare to like prior restructurings that PTC has gone through?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : I think the perspective there is helpful, Kristian, because I think we forget that you guys are -- you've been around for a long time. And I think the subtlety to what you just told me was you're doing all this to stay relevant. And I think in some regards, you're probably more relevant today than you were even a couple of years ago, with this increased view on SaaS, even relative to some of your sort of bigger peers out there that maybe haven't pivoted as aggressively. And so I think what you're saying is that all this stuff is required. We're still growing 12% last year, which is no small fee for a company your size. And that ultimately, that these steps are going to better position the company for durable growth in the longer term and profitable growth in that regard. I want to pivot a little bit to Velocity, Onshape and Arena. Do you think -- I mean I want to ask about sort of like -- because it feels like there's obviously a lot of enthusiasm. Those are great stand-alone assets. And it feels like even in regards, you're doing even better as part of PTC with REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 16, 2021 / 7:00PM, PTC.OQ - PTC Inc at RBC Capital Markets Global Technology, Internet, Media and Telecommunications Conference (Virtual) these businesses. Do you think within this growth segment, are we largely done with the M&A build-out of, I would say, the kind of the growth -- the Velocity side of the business? In other words, is Onshape and Arena sort of what's required to achieve these financial outcomes?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Maybe not the guidance, because the guidance is predicated on the current business. But I guess I'm thinking like strategically positioned longer term, is -- do you have the right assets today to achieve a multiyear view of where you -- where the Board wants to take the company?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : So when you look at the success of what is now Velocity, where is that coming from? Because it seems like there's obviously so many new markets for you that wasn't present -- or that wasn't available prior. So talk about kind of that new logo side of Velocity. But then also something I talked to you about in the past -- because I think one of the questions we get is like, is there a cannibalistic nature to Velocity doing so well that maybe some of your customers want to move off of Windchill and take more of a SaaS-based solution today. Talk to us about kind of those 2 vectors.

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Yes. And I guess the way that I've always personally thought about it is the alternative is you don't have Onshape and you're losing share to somebody else that owns Onshape, because you don't want to -- if you're going to cannibalize, I would think it's because customers want it rather than you losing a logo because of it. So I think it really speaks probably to the leadership of what you guys are doing with that -- kind of that Velocity side of your business. And I think as we think about Atlas and replatforming, it feels like a lot of that can bubble over to the digital thread side of your business as well. It wouldn't be a conversation without talking about partners. You guys have a long list of partners from Rockwell, ANSYS to Microsoft. Can you talk about sort of what you're most excited about from a fiscal '22 perspective? I know Microsoft has been a big player for you guys, and I know you've had a lot of success with ANSYS. Rockwell, there's been some growing pains there. But kind of where are we at from like your level of excitement on partner contributions to '22?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : We got a question from an investor. And it says, would PTC consider accelerating some of their server repurchase activity given the underperformance and reduced leverage?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Will it be share repurchase? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 16, 2021 / 7:00PM, PTC.OQ - PTC Inc at RBC Capital Markets Global Technology, Internet, Media and Telecommunications Conference (Virtual)

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Yes. No, I think, yes, because I think from a signaling perspective, obviously, there's a lot of value here. Even a slight change in allocation that I think would be well received by The Street, just speaking to, I think, the confidence of the vision and this focus on SaaS, right? Maybe in closing -- we've got a minute left, Kristian. This was fast. In your seat, you're paid to be a CFO, you've got an operational hat on as well. So I can appreciate that there's a conservative nature to your views as a CFO, which we certainly appreciate. What gets you the most excited about the next year or 2 for PTC that you think shareholders would need to kind of continue to think about when evaluating owning PTC?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Well, in a lot of regards, it feels like this company has been around for a long time, but it really does feel like while it was a surprise, I think, to the market, this is -- it's still a new PTC in a lot of aspects and one that I think is increasingly being seen, at least for our checks, as a thought leader. So yes, I think to the extent that, that continues to play out over the course of this year, maybe there's some headwinds to turn into tailwinds. And it feels like you guys are at a good baseline to kind of continue to execute here. So Kristian, really, from all of us -- I've known you for a long time. I appreciate everything you've done for us in your time, and for Matt in IR, thank you again for your participation in this conference. And really from all of us at RBC, best of luck, Kristian, and the rest of the PTC team.