PTC Inc at RBC 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 : So I guess to start -- and maybe Kristian we'll start with you. With the backdrop of a potential vaccine and some accelerants and maybe some pent-up demand in your end markets, I think we've all been positively surprised, despite a lot of these headwinds with the resiliency of your ARR through this very challenging period. Could you set the stage for us in terms of what you've seen both in terms of headwinds and tailwinds, but then how that translates to a significantly more durable business than any of us remember 5, 6, 7 years ago?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's great. And I forgot to mention this at the top of the call -- and we are getting some questions in from investors, so thank you for those. But for those that would like to submit questions, please do so and we will insert those as we go here. So thank you for the questions already. Maybe before we kind of get to some of the questions from investors though, I think sort of dovetailing on that first question. I think recognizing that your core business is really -- I think you noted it's -- you've had 12 now consecutive quarters of double-digit constant currency ARR growth, which is really in the midst of everything that's going on, a remarkable -- really testament to the durability of those platforms. Can you talk about what is -- where is that growth coming from? Is it net new? Is it inside your base in terms of expansion? Because I think those growth rates would have been surprising for a lot of folks 3, 4, 5 years ago even.

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's super helpful. And then I want to make sure we devote time to the growth side of the portfolio, but -- I mean I want to make sure we touch on one of the -- what I think is one of the most profound benefits from Onshape is Atlas. And this can be for either of you. But you're in the middle of replatforming, both CAD and PLM on Atlas, which, to me, could be one of the most profound architectural changes we've seen in a long time from PTC. Refresh us in terms of where we're at in that development process? And ultimately, what does it mean for a customer? And I want to make sure because -- how do customers think about the new platform relative to purchases today? Do they think about it? And how do you eventually move a customer for more of an on-prem CAD or PLM to more of a SaaS-based Atlas CAD, for instance? And leave Onshape out of the mix here because I think that's a whole another growth driver in and of itself. Either of you can answer that question. 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 18, 2020 / 3:15PM, PTC.OQ - PTC Inc at RBC Global Technology, Internet, Media and Telecommunications Conference (Virtual)

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Yes. I mean -- yes, I -- so maybe I was a little bullish on in the middle phase. Is it right to think kind of 18, 24 months, is that kind of the horizon for the -- I mean I'm sure there's -- you're probably trying to be a little opaque in terms of the exact timing, but is that kind of the right time frame maybe 1.5 years, 2 years until kind of that platform is ready?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : So I guess -- maybe just one other question on this. We've got a lot to talk about this morning here. But if I'm a customer, right, because I have to imagine they're hearing some of this as well and there's also Onshape and things like that. I guess what's still encouraging is that one of the potential risks would maybe be stalled deals in front of a big launch, but you're not seeing that, which then really speaks to me that customers still find a lot of value. And when we get closer to that phase, I'm sure there's going to be some sort of like a migration path to kind of help customers get there. Is that kind of the right way to think about this that you're going to continue to charge forward with Creo and Windchill as is, and then you're going to make a logical progression to that when the time is right? 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 18, 2020 / 3:15PM, PTC.OQ - PTC Inc at RBC Global Technology, Internet, Media and Telecommunications Conference (Virtual)

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Got it. That makes a lot of sense. Flipping to the growth side of the portfolio, Q4 seem -- obviously, in the face of a lot of uncertainty, still felt like a bit of inflection, whether it was the bounce back in IoT deals. I think you mentioned Onshape. The pipeline is up 6x since the acquisition there. I know the IoT stuff had a bit of a headwind just in terms of getting on-site customers. Walk through some of the dynamics of the growth portfolio when you think about -- specifically, I think you mentioned like we're building pipe for 2022 already. What is it that's driving some of that momentum in some of these various aspects of the growth in your side of the business?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Backlog.

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Got it. We still have a lot to go through here in the next, I don't know, 5 or 7 minutes here. But you guys have an Analyst Day coming up next month that a lot of us are excited about. It's the market's job to determine valuation. But to me, I think one of the things that the market is looking for is conversion of ARR to free cash flow and really delivering on this margin expansion, this cash flow story that seemingly feels like it's really close to happening. Can you walk us through 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 18, 2020 / 3:15PM, PTC.OQ - PTC Inc at RBC Global Technology, Internet, Media and Telecommunications Conference (Virtual) some of your thoughts on converting ARR to cash flow? And could perhaps this year be the year that we see a bit more of an inflection there? Because to me, it feels like that's kind of what the market is kind of waiting to see a bit more of.

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's great. No, we're looking forward to the event next month, perhaps a bit more color there. We're getting some good questions in here. We'll try to address some of these in rapid fire fashion through the next 5 minutes. Tim, maybe one for you because I know you and I chatted about this. I think it was last week. Although in COVID years, it seems like it's a year ago. You guys recently brought in a new COO, Troy Richardson, who's the backfill for Matt Cohen, who went to Cyberark a little bit ago. So the question is, what is Troy's background or skill set? And what is PTC trying to accomplish with the COO position?

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Got it. This is -- it's -- we're getting some really good questions here. Unfortunately, we're going to run out of time here. And this is more than a 2-minute answer. This could probably be a 15-minute conversation. But the question from an investor is what's differentiated about your ARR strategy versus competitors? I don't know if you can answer that in a couple of minutes, but if we figure we kind of -- I'd work through some of these questions.

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : That's great. Yes, for those questions that we didn't get around to getting to ask, hopefully, you guys can address those in one-on-one or small group meetings. But we are, unfortunately, out of time here. We've got a lot that we sort of didn't get to in terms of -- including your partnerships, which is a whole other conversation. But I assume that might be a little teaser into the event next month. I think we're all looking forward to that. And from all of us at RBC, we do thank you for your continued support of our conference. And I think we all look forward to seeing, hopefully, this vaccine do its thing over the next year, but I really do wish you guys all the best of luck through year-end and into next year, and thanks for joining us today.

Question: Matthew George Hedberg - RBC Capital Markets, Research Division - Analyst : Cool. Thanks, everybody.