PTC(PTC) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For fiscal year 2023, the company achieved a 23% growth in Annual Recurring Revenue (ARR), with 13% organic growth, and revenue surpassed $2 billion [5][22] - Free cash flow for Q4 was $44 million, representing a 52% year-over-year increase, while full-year free cash flow reached $587 million, up 41% year-over-year [7][96] - The company reported a 38% operating efficiency for fiscal 2023, which is 620 basis points higher than fiscal 2022 [7] Business Line Data and Key Metrics Changes - In the CAD segment, ARR grew by 10% in Q4, primarily driven by Creo and Onshape [8] - The PLM segment saw a 34% ARR growth in Q4, with 15% organic growth, largely due to Windchill and strong demand for Codebeamer [15] - The acquisition of Pure Systems is expected to enhance the Codebeamer momentum [30] Market Data and Key Metrics Changes - ARR growth in the Americas was 25%, in Europe it was 24%, and in APAC it was 18% [88] - Demand for ALM tools is expanding across various verticals, particularly in the automotive industry due to the rise of software-defined vehicles [89] Company Strategy and Development Direction - The company is focused on maintaining double-digit ARR growth for fiscal 2024, with guidance set at 11% to 14% [6][14] - The transition to a subscription business model is expected to provide sustainable operating leverage and cash flow growth [7][20] - The new CEO, Neil Barua, emphasizes a disciplined and metrics-driven execution of the company's strategy [13][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate a challenging economic environment, highlighting strong customer demand and low churn rates [87] - The company anticipates continued growth in ARR and free cash flow, with a focus on operational execution and customer satisfaction [20][37] Other Important Information - The company plans to prioritize debt repayment in fiscal 2024, with expectations to end the year with approximately $1.7 billion in gross debt [24] - The company has paused its share repurchase program and expects an increase in diluted share count by approximately 1 million shares in fiscal 2024 [24] Q&A Session Summary Question: Insights on the strategic roadmap for fiscal '26 - The new CEO indicated that there are nuances in the strategic roadmap that will be shared in detail at the upcoming Investor Day, focusing on PLM expansion capabilities [43] Question: Strength of Codebeamer and customer upgrades - Management noted that the momentum in Codebeamer is driven by displacing other tools and expanding into new customer segments, particularly in the automotive sector [45][46] Question: Customer feedback on PLM and CAD cloud transition - The CEO highlighted ongoing interest in SaaS offerings and the importance of optimizing customer conversion experiences, while noting that current ARR growth is driven by multiple factors beyond SaaS [50][51] Question: Visibility into fiscal '24 performance - Management expressed confidence in visibility due to multiyear contracts and high retention rates, along with deferred ARR providing additional assurance [55][56] Question: Opportunities for monetization beyond existing users - The company is exploring revenue opportunities as Windchill expands beyond engineering into other enterprise functions, with a focus on metrics-driven approaches for sustained growth [58][62]