PTC Inc

NASDAQ:PTC

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the PTC 2023 First Quarter Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation the conference will be open for questions.

I would now like to turn the call over to Matt Shimao, PTC's Head of Investor Relations. Please go ahead.

[Matt Shimao, Head of Investor Relations]

Good afternoon. Thank you, Rob and welcome to PTC's first quarter 2023 conference call. On the call today are Jim Heppelmann, Chief Executive Officer; Kristian Talvitie, Chief Financial Officer; and Mike DiTullio, President of our Digital Thread Group.

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 will be making 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'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, February 1 2023 and PTC assumes no obligation to update these forward-looking statements. During the call, PTC 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's Chief Executive Officer, Jim Heppelmann.

[Jim Heppelmann, Chief Executive Officer]

Thanks, Matt. Good afternoon, everyone and thank you for joining us. Turning to slide 4. I'm pleased to report that despite seeing some incremental macro softness, PTC delivered a solid first quarter to kick off fiscal 2023.

On the top-line metric of ARR we came in at $1.603 billion, which was above the high end of our range and up more than 15% year-over-year. The strength was broad-based across all product groups and geographies. Sorry about that, a little interference. The strength was broad-based across all product groups and geographies.

Organic ARR growth was 14% with Codebeamer then contributing that extra point of inorganic growth. The strong Q1 ARR results put the company in a position to narrow our original 10% to 14% full year ARR guidance to 11% to 14% as we feel that the 10% outcome has become increasingly implausible with a solid Q1 behind us.

Switching to our bottom-line metric of free cash flow we delivered $172 million ahead of our guidance and up 28% year-over-year. We raised our free cash flow guidance for the full year by $15 million. Currency had little impact to free cash flow in Q1, but it is expected to be incrementally helpful as the year progresses.

On the subject of currency, I'll remind you that Kristian will cover the ongoing effects of foreign exchange fluctuations later in the call. So to simplify things I'll focus my discussion on constant currency results when discussing top-line metrics.

Turning to slide 5. Shortly after our first quarter close we completed the acquisition of ServiceMax. ServiceMax is not included in the Q1 results we reported though we did incur some acquisition-related costs that we're a headwind to our nevertheless strong free cash flow results in Q1. With the deal now closed ServiceMax will be included in our guidance going forward.

To recap the highlights of this business as now part of PTC, ServiceMax is used to manage the service processes for high-value long life cycle products. Think of products like an MRI machine in a hospital, a machine tool in a factory or pumping equipment at a refinery. This has always been a sweet spot for PTC and we have many customers matching this profile.

Referring to the infinity diagram on slide 5, many of you know that PTC's logo represents the interplay of physical and digital and that logo provides a good way to explain the fit with ServiceMax. The digital part of our logo refers to when products are under development. At this point, they exist in a purely digital form which is authored in Creo and managed in Windchill.

Being purely digital at this stage products are easy to change and highly configurable. Each time our customers get an order their factories take a configuration of the digital product data that matches the order and use it as the recipe to produce the physical product, which is then delivered to the end customer. That's where the physical part of our logo fits in.

Physical products are very different. If you want to change them for example, you need to dispatch a truck to the customer site carrying a technician and spare parts. Spare parts are managed in our Servigistics software. The technician will need access to similar types of digital product information, as what the factory used when creating the product. This service information is created using Arbortext and Vuforia.

High-value products are operated by the customer for years or even decades. These products require regular service to keep them up and running, and this service is typically provided by the manufacturer, who views the recurring service contracts and spare part sales as a highly desirable source of revenue and profit.

ServiceMax helps the manufacturer manage their entire installed base of physical product instances and orchestrates all the necessary service activities. By monitoring the installed base of products, ThingWorx adds a lot of value to ServiceMax because it allows service to be more proactive and preventative in nature. And sometimes the service can even be done remotely thereby canceling the need for a truck roll.

As you can see ServiceMax has great synergy with Creo and Windchill, because on one hand the service process consumes the digital product data created in engineering in the form of parts catalogs and service instructions. And on the other hand, the service process is the primary source of feedback that drives ongoing product improvements through engineering change orders or ECOs.

Windchill serves as the system of record for the digital definition of all possible product configurations and ServiceMax serves as the system of record for the actual physical instances of products that exist, each of which may have a slightly different configuration. As the infinity diagram implies, there is a digital thread of product information flowing between these key systems in both directions throughout the product life cycle.

Aligning ServiceMax with PTC's various offerings will lubricate this flow of data creating tremendous business value. No competitor has a solution comparable to this. Equally important, as the service system of record, ServiceMax knits together our existing SLM products, allowing PTC to now offer the industry's first truly comprehensive offering for service management optimization.

You can think of our new SLM offering as a hub-and-spoke model with ServiceMax as the hub and PTC's various other service solutions as spokes. For example, ThingWorx IoT connects to and monitors the vital signs of installed products to enable preventative remote service. Arbortext dynamically publishes technical service information to match each product configuration in the installed base.

Vuforia AR enables this technical service information to be augmented onto each installed product to make service technicians more productive. And Servigistics allows customer service level agreements to be met, while carrying the smallest possible inventory of spare parts. With the acquisition now closed work is underway to enable deeper integration between ServiceMax and these various PTC offering.

I'm pleased to announce that Neil Barua the CEO of ServiceMax is joining PTC and will preside over this expanded SLM business that now exceeds $300 million of combined ARR. Neil and team will unveil a broad new SLM vision at our LiveWorx conference in May. And based on the number of inquiries we're getting, I expect it to be one of the highlights of the conference.

The strategic fit with ServiceMax is excellent and we're excited about the synergies we can generate by cross-selling from engineering to service and vice versa and also cross-selling between our various SLM offerings within the service domain. The financial fit is excellent too as the transaction is expected to be accretive to PTC's growth rate as well as the PTC's cash flow and this drove part of today's guidance raises.

ServiceMax also increases PTC's total addressable market. The ServiceMax business has been growing in the mid-teens which is a few points faster than the market, but we see potential for the business to accelerate to high-teens growth over time as synergistic cross-sell opportunities are realized.

Turning to Slide 6. Given the elevated focus on profitability that investors all share in today's market, I want to reiterate the margin expansion program that PTC management has been driving. The organizational realignment we did at the end of fiscal 2021 and the resource rebalancing work we did during fiscal 2022 have created an organizational model for PTC that's both highly efficient and fully sustainable.

When we made these changes, we were not addressing a problem per se, but simply pursuing margin expansion opportunities that we had identified. The actions we took proved prescient, as we're now well-positioned for a macro downturn.

While many notable tech companies are announcing layoffs to come to terms of bloated cost structures, thanks to our proactive actions, we're entering this period of uncertainty with a very lean cost structure and we do not anticipate any need for layoffs or restructuring.

In Q1, non-GAAP operating margin expanded to 36% compared to 35% a year ago. That sounds like progress, but due to ASC 606 noise, it doesn't fully capture the full magnitude of improvements we've made.

We prefer to assess our margin progress by focusing on a more meaningful metric we now call operating efficiency. Operating efficiency is the same metric that we previously called cash contribution margin, but we're changing the name of the metric to be more precise that it is an operating metric, not a non-GAAP financial measure.

This is a change in name only. The metric is still calculated the same way and still measures how much of our billings we're able to convert to cash flow each year. At the midpoint of our ARR guidance range, based on actions already taken, we continue to expect this operating efficiency to expand by another approximately 450 basis points in fiscal 2023, following the 300 basis point improvement we delivered last year.

The significant operating efficiency improvement when layered on top of double-digit ARR growth is what drove the strong Q1 free cash flow result and is what will drive the 38% free cash flow growth we're guiding to for fiscal 2023. Kristian will elaborate further.

Turning to slide seven. As you're aware, our FY 2023 ARR guidance range, has from the start, contemplated the possibility of a potential macro downturn. In Q1, we saw further signs of a downturn in the form of incrementally softer bookings.

At the same time, we were comforted by strong renewals, which actually improved slightly year-over-year, reinforcing just how sticky our software is. The net impact of these softer bookings and stronger renewals was a slowdown of about 0.5 percentage point from last quarter's 16% ARR growth rate, taking the Q1 ARR growth rate down to about 15.5%.

This was obviously less than we had allowed at the high end of our Q1 ARR guidance range, so ARR results landed $3 million above the range. The softness was relatively consistent across various dimensions of the business, suggesting it was macro related, rather than any type of competitive issue. The summary is that, after posting 15.5% growth in Q1, we remain well positioned to perform against our financial targets and indeed, have raised our guidance accordingly.

Turning to slide eight. With Q1 behind us, as compared to our original guidance, we're now on track to deliver ARR growth results within a narrower 11% to 14% range in fiscal 2023, with the low end having been raised, because the 10% outcome is less plausible now, given that solid Q1.

Keep in mind, the addition of ServiceMax to our portfolio happens here in Q2 and the inclusion of ServiceMax will recalibrate the ARR growth range upward. In a few minutes Kristian will outline a new guidance range, that's essentially 11% to 14% plus 1,100 basis points more from ServiceMax added on top.

Across this range of ARR outcomes, we've also raised the original cash flow guidance we provided a quarter ago by $15 million to $575 million, which now represents 38% growth for the full year. The raise is powered in roughly equal parts: by a strong free cash flow result in Q1, the expected $5 million benefit from the ServiceMax acquisition and improving foreign exchange rates. Should exchange rates hold, or further improve, FX could prove incrementally helpful as the year progresses. Kristian will elaborate on the various factors involved here too.

Turning to slide nine. Let's look at ARR growth across all geographies. ARR growth in the Americas was 16%. In Europe, ARR growth was 15%, despite the Russia exit in Q2 of last year which still affects the growth rate, given the trailing nature of our ARR metric. ARR growth in APAC was 12%.

Across all geographies, the largest ARR growth in terms of magnitude was driven by continued strong demand for Creo CAD and Windchill PLM products.

In the Americas, we saw the strongest ARR percentage growth in IoT, Arena, Windchill and Onshape. In Europe and APAC the growth rate was highest for Arena, which has been expanding outside the US. Arbortext and Servigistics both delivered strong growth rates in Europe and APAC. And finally in Europe, Onshape and augmented reality also delivered strong percentage growth.

Next let's look at the ARR performance of our product groups on Slide 10. In CAD, which is those products that enable authoring of product data, we delivered 10% ARR growth in Q1 in a market that has been growing approximately 8%. Within this the growth was primarily driven by Creo, supplemented by strong percentage growth in Onshape and Arbortext.

In PLM, which includes those products that enable data management and process orchestration for product development, our ARR growth rate in Q1 was 20%, or 18% organic with strong growth across all geographic regions. In PLM, we continue to significantly outperform the market, which has been growing approximately 12%. Half of our Q1 growth was driven by Windchill, but ALM including Codebeamer and Arena, IoT and retail PLM also contributed to great Q1 PLM results by delivering strong percentage growth.

I'd like to discuss Windchill+ in the context of a new logo customer on Slide 11. Given the importance of our SaaS transformation program as a growth driver, I'm pleased to see good progress ramping up the new multi-tenant Windchill+ solution. While it's still early across a combination of new logo deals as well as lift-and-shift SaaS conversions, we now have about a dozen Windchill+ customers in production or headed there shortly with dozens more opportunities in the pipeline.

As we said at our Investor Day, we expect an S-curve type of ramp over multiple years for our Plus offerings. And thus far we're tracking well to that expectation. To share a customer story, we landed a new logo deal with a well-known motor sports company. That's a great example of an organization that's reaping the benefits of the streamlined PLM implementation experience that Windchill+ offers. This customer has committed to enter a new racing circuit, but faces a tight time line to get prepared. Their team needed a PLM system to be in place quickly, because they're designing a more efficient power unit that needs to be completed and tested in short order. And then as usual there'll be a steady diet of changes and improvements thereafter.

With their Windchill+ implementation the motor sports company achieved a production ramp-up time of several months, including integration with their hybrid SaaS ERP system. They got there so quickly by leveraging the out-of-the-box capability of Windchill+ delivered by PTC to the customer as a secure preconfigured service. This customer has no dedicated IT team, so leveraging SaaS applications is important to enable them to keep their internal efforts focused on racing, while improving collaboration across team members in the field and around the globe.

As a reminder, Windchill+ is the tip of the iceberg of a bigger Plus strategy, and you'll see us follow with Creo+ and similar premium SaaS offerings in FY 2023 and beyond. We are aiming to launch Creo+ and the bigger Plus strategy at LiveWorx in May. I'd like to share another customer anecdote to help you better understand the immense power of our technology.

Turning to Slide 12, I want to tell you about an important project from our customers at the U.S. Department of Energy. I trust you saw the mid-December news that for the first time scientists at Lawrence Livermore National Laboratory have produced a nuclear fusion reaction that generated more energy than it consumed. This major scientific breakthrough happened at Lawrence Livermore's National Ignition Facility and may pave the way to a future filled with clean energy.

The National Ignition Facility, or NIF is essentially a massive machine of enormous size and complexity. The NIF is a precision-engineered system of systems that generates and then directs 192 powerful laser beams onto a pencil eraser-sized area that heats to millions of degrees to ignite the nuclear fusion reaction. The sports stadium-sized NIF machine is all modeled in Creo and Windchill, everything they say except the walls and the bathrooms. With 3.5 million components, we believe the NIF is the largest Creo and Windchill assembly ever made and very likely, the largest assembly ever modeled in 3D CAD, which is a real testament to the power of our technology.

During our regular collaborations with DOE teams over many years now, PTC product teams have been challenged to further develop our products to enable such highly advanced projects in what has proven to be a mutually beneficial relationship. While substantially more work lies ahead in the effort to harness the potential of fusion energy as demonstrated by the NIF, we're very proud of the role that our technology has played in enabling this early breakthrough. And the announcement was exciting for many PTC employees who have been involved including me. PTC may very well-prove to play a key enabling role in the ultimate ESG breakthrough.

Summarizing then on slide 13. While in Q1, we saw incremental signs of a macro slowdown there's a lot going our way right now. First, PTC has established itself as the clear category leader in PLM, which has become a must-have technology backbone for digital transformation at industrial companies. We just posted another quarter of 18% organic PLM growth well-ahead of market peers. We are conquering the PLM market.

The addition of ServiceMax further extends what was already a unique portfolio of interconnected digital thread capabilities across the full product life cycle and ServiceMax is expected to be a tailwind to ARR and free cash flow right from the start. Both Codebeamer and ServiceMax will provide a big boost to our PLM conquest efforts.

Second, while the company growth is at a double-digit level already, we're in the early days but executing well against a major on-premise to SaaS transformation that should provide a multiyear growth tailwind.

Third, we have a reputation for driving margin expansion that goes back more than a decade and the proactive changes we've already made are driving high levels of free cash flow growth again this year.

Fourth, we're demonstrating that our business model is very resilient. Top line growth and bottom line profitability are at levels that are amongst the best in our industry peer group. Not many peer companies are projecting the double-digit organic top line and 38% bottom line growth that PTC is guiding to this year.

And finally, we're led by a team that has deep expertise and proven ability to drive growth and margin expansion. We're happy to welcome Neil Barua to the PTC executive ranks because Neil and the entire ServiceMax team share the same depth and passion for the business that's so important here in the PTC culture.

With so many positive trends going our way, I continue to believe PTC has a tremendous opportunity to create shareholder value even in the face of a macro downturn we've all been expecting.

With that, I'll turn it over to Kristian for his more detailed commentary on financial results and guidance.

[Kristian Talvitie, Chief Financial Officer]

Thanks, Jim, and good afternoon, everyone. Before I review our results I'd like to note that I'll be discussing non-GAAP results and guidance and ARR references will be in both constant currency and as reported.

Turning to slide 15. In Q1 2023 our constant currency ARR was $1.6 billion, up 15% year-over-year and exceeded guidance. On an organic constant currency basis excluding Codebeamer, our ARR was $1.59 billion, up 14% year-over-year.

As Jim explained our top line strength in Q1 was broad-based. We're executing well against our strategy and we're continuing to improve upon the strong market position that we have. Our SaaS businesses saw continued solid ARR growth in Q1 as well. On an as-reported basis we delivered 11% ARR growth, 10% organic due to the impact of FX headwinds. Currency fluctuations were positive in Q1 of 2023 and our as reported ARR was $60 million higher than our constant currency ARR. However, on a year-over-year basis currency fluctuations were still a meaningful headwind.

Moving on to cash flow. Our results were strong with Q1 coming in ahead of our guidance across all metrics. While it was great to see favorable FX movements during Q1, there was no impact to free cash flow from FX. Our free cash flow performance in Q1 was driven by strong execution based on a foundation of solid collections and cost discipline.

Our cash from operations also came in ahead of guidance by $11 million, due to a combination of free cash flow outperformance and the timing of capital expenditures which were $9 million in Q1, compared to our guidance of $5 million.

When assessing and forecasting our cash flow, it's important to remember a few things. The majority of our collections occur in the first half of our fiscal year. 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.

Q1 revenue of $466 million increased 2% year-over-year and was up 9% year-over-year on a constant currency basis. In Q1 recurring revenue grew by $12 million, perpetual license revenue grew by $5 million and professional services revenue declined by $9 million year-over-year.

The decline in professional services revenue is consistent with our strategy to transition some of our professional services talent and revenue to DxP our partner for Windchill+ lift-and-shift projects.

As we've discussed previously, revenue is impacted by ASC 606, so we do not believe that revenue is the best indicator of our underlying business performance, but we'd rather guide you to ARR as the best metric to understand our top line performance and cash generation.

Before I move on to the balance sheet, I'd like to provide some color on our non-GAAP operating margin, as I did last quarter. Compared to, Q1 2022 our non-GAAP operating margin expanded by approximately 100 basis points to 36% in Q1 of 2023.

We continue to caution that because revenue is impacted by ASC 606 other derivative metrics such as gross margin, operating margin, operating profit and EPS are all impacted as well. Still, it's worth mentioning, that we're benefiting from the work that we've done to optimize our cost structure in fiscal 2022.

On a year-over-year basis in Q1, we continue to grow our top line at a faster rate than our spending and delivered significantly higher ARR and free cash flow.

Moving to slide 16, we ended the first quarter with cash and cash equivalents of $388 million. Our gross debt was $1.36 billion with an aggregate interest rate of 4.3%. Looking forward, in Q2, in conjunction with the ServiceMax acquisition, we took out a $500 million term loan and increased the size of our revolving credit facility from $1 billion to $1.25 billion.

The net of new borrowings and debt pay down in Q2, should leave us with $1 billion in high-yield notes, the $500 million term loan and approximately $450 million drawn on the revolver at the end of the quarter.

As a reminder, we also have a second payment for the ServiceMax transaction, due in October 2023 of $650 million. We intend to fund this with cash on hand and our revolving credit facility. This deferred payment is included in debt on our balance sheet and is factored into our debt-to-EBITDA ratio.

We expect our debt-to-EBITDA ratio to be approximately 3.4 times, at the end of Q2. We should be around three times levered by Q4 and below three times throughout fiscal 2024 and into fiscal 2025, as we continue to pay down debt.

To help you with your models, in fiscal 2023 as it relates to cash flow, we expect total cash interest payments of approximately $85 million. And as it relates to the P&L, we expect interest expense of approximately $125 million.

Given the interest rate environment, we expect to prioritize paying down our debt in fiscal 2023 and 2024. We'll pause, our share repurchase program. And in fiscal 2023, we expect our diluted share count to increase by a little under, one million shares.

We expect to have substantially reduced our debt by the end of fiscal 2024 and we'll then revisit the prioritization of debt paydown and share repurchases.

Despite this interruption, our long-term goal assuming our debt-to-EBITDA ratio is below three times, remains to return approximately 50% of our free cash flow to shareholders via share repurchases, while also taking into consideration the interest rate environment and strategic opportunities.

Next slide 17 shows our ARR by product group. In the constant currency section on the top half of the slide, we used FX rates as of September 30, 2022 to calculate ARR for all periods. You can see on the slide, how currency dynamics have resulted in differences between our constant currency ARR and as-reported ARR over the past five quarters.

Exchange rates continued to move materially in Q1 2023 causing a difference between constant currency ARR results and our as-reported ARR results. Based on the exchange rates, at the end of Q1 2023, our as-reported ARR in Q2 of 2023 would be higher by approximately $62 million compared to the midpoint of our constant currency guidance and fiscal 2023 as-reported ARR would be higher by approximately $67 million compared to our constant currency guidance midpoint.

We report both actual and constant currency results and FX fluctuations can obviously have a material impact on actuals. But remember that, we provide ARR guidance on a constant currency basis. If exchange rates fluctuate significantly between the end of Q1 and in the end of Q2 2023 the impact to our as-reported ARR would also change.

We believe constant currency is the best way to evaluate the top line performance of our business, because it removes currency fluctuations from the analysis, positive or negative. Given the sharp moves that, we've seen recently, I thought it would be useful to provide an updated ARR sensitivity rule of thumb on slide 18. In addition to the US dollar, we transact in euro, yen and more than 10 other additional currencies.

Using currency rates at the end of Q1, the impact of a $0.10 change in the euro-to-USD rate would be $39 million positive or negative, and the impact of a ¥10 change in the USD-to-yen rate would be $9 million again positive or negative. And of course, the estimated dollar impact to ARR is dependent on the size of the ARR base.

With that, I'll take you through our guidance on slide 19. For our ARR guidance amounts, we're using FX rates as of September 30, 2022. The previous guidance shown on this slide is from our November 2022 Investor Day presentation, and includes ServiceMax.

For fiscal 2023, we expect constant currency ARR growth of 22% to 25%, which corresponds to a fiscal 2023 constant currency ARR guidance range of $1.91 billion to $1.96 billion. This narrowed range is based on two primary factors. First, we took up the bottom end of the 10% to 14% guidance range we provided on our Q4 earnings call, which excluded ServiceMax.

While we saw some incremental macro-driven booking softness in our first quarter, this was partially offset by better-than-planned churn and our guidance contemplated the potential for a much bigger impact than what we saw, and we actually finished $3 million above the high end of our Q1 2023 ARR guidance range.

So based on our strong Q1 results and forecast for the year, while still being mindful of the macro environment, we feel comfortable taking up the lower end of the range, which still allows for continued softening due to the macro environment.

Secondly, the other update to guidance is adding approximately $170 million for ServiceMax compared to our Investor Day assumption, which was for approximately $175 million. There's a few reasons we're doing this, which include. First, ServiceMax' fiscal quarters ended one month later than ours. As we all know, the final month of a quarter in a software company is really when the magic happens.

So, while I think that ultimately their results will align with PTC's quarter-end hockey stick, I also think it's prudent to assume it may take a few quarters to align selling and customer buying behavior.

Second, as you know Salesforce.com is a go-to-market partner with ServiceMax for its Asset 360 product. Salesforce just announced a fairly sizable reduction in force. And while we do not know if or how this may impact ServiceMax business in the coming months, we feel it's a valid concern which we want to account for in our guidance.

And third, frankly, the uncertainty of the macro environment applies to ServiceMax as well. So, it's primarily for these three reasons that we're derisking the ServiceMax guidance for fiscal 2023 and adding $170 million to our now updated 11% to 14% guidance range.

With a strong Q1 behind us and given our pipeline and forecast and how we've set our guidance ranges, we believe we're well-positioned to achieve our fiscal 2023 ARR guidance.

Note that we expect modestly more deferred ARR to become ARR in fiscal 2023 than in fiscal 2022. And our churn in Q1 was lower than planned. In dollar terms, churn was actually lower in Q1 2023 than it was in Q1 2022 and that's against a bigger base of ARR.

For Q2, we're guiding constant currency ARR to be in the range of $1.79 billion to $1.81 billion. At the midpoint, this equates to 25% constant currency growth. I'll discuss our Q2 guidance in more detail on the next slide.

On cash flows for fiscal 2023, we raised our guidance. We now expect cash from operations of approximately $595 million, up 37%; and free cash flow of approximately $575 million up approximately 38%.

Compared to the guidance we provided a quarter ago, our updated $575 million target for free cash flow factors in our strong execution and results in Q1, $5 million from the ServiceMax acquisition which we already communicated at our Investor Day, as well as an increase from FX tailwinds for the remainder of the year. Assuming we hit our Q2 free cash flow target, we'll be at approximately 65% of our full year target similar in the past two years.

Our CapEx assumption for fiscal 2023 is $20 million. Therefore relative to our free cash flow guidance of $575 million, we're guiding to cash from operations of $595 million.

For Q2, we're guiding to free cash flow of approximately $200 million. We expect approximately $5 million of CapEx in Q2 and therefore, our cash from operations guidance is approximately $205 million.

As you model the quarters of fiscal 2023, keep in mind, we expect the quarterly distribution of full year cash flow results to follow a similar pattern as in fiscal 2022 and fiscal 2021 with over 60% of cash flow in the first half of the year and Q4 being our lowest cash flow generation quarter.

Moving on to revenue guidance, we raised -- which we raised from our November 2nd guidance, primarily because of ServiceMax and currency. For fiscal 2023, we expect revenue of $2.07 billion to $2.15 billion which corresponds to a growth rate of 7% to 11%.

ASC 606 makes revenue fairly difficult to predict in the short-term for on-premise subscription companies, hence the wide range. More importantly, revenue does not influence ARR or cash generation as we typically bill customers annually upfront regardless of term lengths.

Turning to slide 20. Here is an illustrative constant currency ARR model for Q2 2023. You can see our results over the past nine quarters and in the far-right column, we've modeled the midpoint of our Q2 constant currency ARR guidance range. Because our ARR tends to see some seasonality, the most relevant compare is Q2 of 2022.

The illustrative model indicates, that to hit the midpoint of our Q2 2023 guidance range of $1.8 billion, we need ServiceMax ARR of approximately $160 million, which is what we said at Investor Day and believe is a reasonable target.

On top of the ServiceMax contribution, we need to add $37 million of organic ARR on a sequential basis. This is $19 million less than the $56 million we added in Q2 of fiscal 2022. In percentage terms, we need 2% organic sequential ARR growth to hit our guidance midpoint for Q2, which is at the lower end of what we've delivered over the past nine quarters. All things considered, we believe we've set our Q2 2023 constant currency ARR guidance range prudently.

Turning to Slide 22. I'll conclude my prepared remarks today by highlighting, that we're prepared for a storm and expect to be resilient in the face of one. From a top line perspective, we serve industrial product companies. And R&D, at those companies tends to be quite resilient, so we have a supportive top line backdrop. We also have a subscription business model and our products are very sticky with our customers.

Just as importantly from a cost perspective, we've already battened down the hatches. In addition, to the cost optimization work we did last year, we've already slowed planned hires and backfills as we head into Q2. Nevertheless, as we've said in the past, we don't have a Pollyanna-type view when it comes to the macro situation.

We have a strong track record of disciplined operational management. And if the macro situation gets meaningfully worse, you can expect us to moderate our spending further, to better align spending with market realities and mitigate the impact on our fiscal 2023 cash flow results.

For example, variable compensation would automatically adjust. And depending on the magnitude of the downturn, we would also be incrementally more cautious on hiring and marketing spend travel, et cetera.

On the other hand, if the macro situation improves and/or if the dollar weakness continues, this would be favorable for our cash generation. And in that scenario, we would have the optionality to invest more aggressively in our business.

There's no question that the macro environment is hard to predict. Nevertheless, we've contemplated one strong quarter of fiscal 2023 -- completed one strong quarter of fiscal 2023 and are positioned to continue producing attractive financial results, based on our strong product and market position coupled with solid execution and prudent financial management.

With that, I'll turn the call over to the operator to begin Q&A.

[Operator]

[Operator Instructions] And your first question comes from the line of Matt Hedberg from RBC Capital Markets. Your line is open.

[Matt Hedberg, RBC Capital Markets]

Great, guys. Thanks for taking my question. Congrats on the strong results guys. Jim, you guys are pushing the envelope for SaaS beyond many peers that we talk to which is obviously, great. I guess a two-point question, do you think that's resulted in sort of a larger pipeline coverage ratio than maybe a year ago? And with your Plus strategy, do you think the opportunity for PLM and CAD replacements could accelerate as well?

[Jim Heppelmann, Chief Executive Officer]

Yes. Well, let's say, certainly the Plus strategy and SaaS here at PTC is helpful to the pipeline, because first of all when deals come in at SaaS, they come in twice the size as they would have been had they've been on-premise, so right away you have a factor there. But I'd also say, the interest level is quite high. I mean, I think if you come to LiveWorx, you're going to see lots of customers are going to come, just to learn about SaaS because they're interested. We're at that phase where everybody is interested. Some people will bite sooner than others, but everybody wants to hear about it, start thinking about it and understand how it plays into their future.

Then on the competitive replacement opportunity, I do think that some of our competitors are laggards with SaaS or they're doing SaaS in a pretty hokey way. For example, we have a French competitor, who is trying to become a hyperscaler. And when you place an order with them they turn around by hardware to host it on. And between you and me I don't really think that's the right strategy. And I think a lot of companies are going to say, "I don't actually want to buy into a strategy like that because the day it all collapses I'm a little bit out in the cold."

So I do think that people are going to say, "We need to go to SaaS. If my vendor doesn't have a good story, I should shop around." And at PTC, we have mature proven products like Creo and Windchill, that will be available in an honest-to-god true SaaS form not unlike for example Microsoft Office 365. And then on the other hand, if you want to go full bore, clean slate, right from the start pure SaaS, well we have Onshape and Arena, which are the SaaS-est products in our entire industry. So I do think we're going to get some amount of people moving to SaaS and switching vendors at the same time. And as you said, we're way out there ahead of people with a pretty serious well-thought-out strategy.

[Matt Hedberg, RBC Capital Markets]

Thanks, Jim. Congrats.

[Operator]

Your next question comes from the line of Matt Broome from Mizuho Securities. Your line is open.

[Matt Broome, Mizuho Securities]

Thanks very much. Hi, Jim and Kristian.

[Jim Heppelmann, Chief Executive Officer]

Hi, Matt.

[Matt Broome, Mizuho Securities]

I guess firstly just how is ThingWorx growth during the quarter? Has it been impacted at all by the reallocation of resources there?

[Jim Heppelmann, Chief Executive Officer]

ThingWorx growth was pretty steady. No doubt that reallocation of resources isn't actually helpful to just standalone ThingWorx growth, but I think it's actually been quite helpful to PTC growth and very, very helpful to PTC cash flow, because instead of hiring new resources that would consume cash flow, we moved resources around and let that fall to the bottom line. So I think probably not helpful to ThingWorx, although ThingWorx is clipping along at a decent growth rate but very helpful to PTC altogether kind of neutral to growth altogether very helpful to cash flow.

[Matt Broome, Mizuho Securities]

Okay. Great. And if I could just also ask channel continues to lag direct AR growth on a constant currency basis, can you talk about why growth is a little bit slower in the channel I guess with your partners? And what might be done to sort of bring that more into line with your direct business?

[Jim Heppelmann, Chief Executive Officer]

Well, I think they simply are more impacted by the macro situation. When the economy was strong our channel was growing faster than direct. And I think small companies have less room if you will less capacity to weather a downturn, so they're more conservative. So I think in a downturn situation, small and medium businesses, which is what our channel cover they're the first ones to start getting conservative on spending.

And I mean we've seen that. I think for example, a lot of the start-up companies aren't hiring. And if they're not hiring they don't need expansions and so forth. So I would attribute that the channel is relatively more macro sensitive than the direct sales force. Now on the rebound it goes the other way of course.

[Matt Broome, Mizuho Securities]

Right. Makes sense. Okay. Thanks, again and congrats on the results.

[Jim Heppelmann, Chief Executive Officer]

Thank you.

[Operator]

Your next question comes from the line of Tyler Radke from Citi. Your line is open.

[Jim Heppelmann, Chief Executive Officer]

Hey, Tyler.

[Tyler Radke, Citi]

Hey, hey, good evening, Jim. Good evening, Kristian. So a question just on the bookings commentary. So I think last quarter your base case was for flattish year-over-year bookings for the full year to kind of get to that 12% ARR growth obviously, pre-ServiceMax. When you say you saw bookings weaken, did bookings go negative during the quarter? And where is kind of your underlying assumption for the full year on bookings?

[Jim Heppelmann, Chief Executive Officer]

Yes, Tyler, so we thought a lot about how to describe this. And what we really owe you is transparency to how bookings and macro affect ARR because ARR is the key metric. And we're in this funny situation, where what happened in the quarter didn't align to any of our scenarios because bookings was a little softer and churn frankly was shockingly good. So what we decided is if we really want to tell you what exactly happened to bookings we're going to tell you exactly what happened to churn and we probably ought to tell you what happened to deferred and then maybe we ought to get into year-over-year comps because as you know bookings is where the volatility is. So we decided, we'll disclose it, we'll quantify it, as 0.5 percentage point of slowdown. So 0.5 percentage point you can do the math it's about $8 million on $1.603 billion.

So we had $8 million less in bookings than what it took to maintain a 16% growth rate, but $3 million more in bookings than what it took to hit the high end of the guidance range we gave you. So, I think if you look at it that way, in the year now we've lost $8 million and that will show up four quarters. And it won't compound but the $8 million will show up in the next four quarters.

I think as we look forward the pipeline looks pretty decent. The forecast looks good. The real question will be, post rates, does the business come in or not. And that's sort of an unknown. But to us, Q1 while it was a little bit softer than the previous two quarters, actually it was not a bad quarter.

[Tyler Radke, Citi]

That's super clear. Thank you. And just a follow-up, so going back to one of the questions on the competition, maybe broader than just what you're seeing as it relates to SaaS. Can you just talk about maybe the strength you're seeing in PLM more broadly? And obviously the growth rates you're posting on an organic basis are kind of above market. Who do you see you're taking share from and anything from a product perspective you'd highlight?

[Jim Heppelmann, Chief Executive Officer]

Yes. I mean nothing changed materially in the quarter. But to kind of remind you, just in general what's happening. SAP has given up share, Oracle has given up share. In our view, Dassault has given up quite a bit of share, because we passed them in the last year and we're opening up quite a gap now. And we think Siemens has given up some share. Siemens has been posting actually negative numbers in terms of PLM growth of late, and it will be interesting to see at the next earnings report.

I encourage you all to dig in and try to parse it apart, because I think Siemens is losing a lot of momentum. They have some structural changes happening, so it's a little hard to kind of tease it all out and they don't provide much disclosure. But I think you’re going to see -- Siemens would be our toughest competitor and you're going to see us post growth rates approaching 20% and it wouldn't surprise me if theirs has a negative number on the front of it when they report this quarter.

[Tyler Radke, Citi]

Thank you.

[Operator]

And your next question comes from the line of Steve Tusa from JPMorgan. Your line is open.

[Jim Heppelmann, Chief Executive Officer]

Hi, Steve.

[Steve Tusa, JPMorgan]

Hey, guys. Thanks for taking my questions. Sorry, I'm kind of new to covering you guys and so the math maybe is a little bit tricky. But like you said last quarter that I think it was a low-single-digit constant currency bookings growth year-over-year. I'm kind of having trouble putting what you just said kind of altogether. What does that actually mean on a year-over-year constant currency bookings growth rate for this quarter?

[Jim Heppelmann, Chief Executive Officer]

Yes. Steve, I mean we don't disclose. We don't report bookings. We don't guide bookings. We provide color. And because, again, the scenario was a little strange compared to the guidance scenarios, softer on bookings, stronger on free cash flow to avoid having to disclose a lot more detail, we netted it out and netted it out as better than guidance but a slowdown of about $8 million for the year 0.5 percentage point.

[Steve Tusa, JPMorgan]

Yes. Okay, got it. That's helpful. And then just lastly on free cash flow, pretty strong even seasonally even how you talk about it with a decent amount coming here in the first half of the year assuming you hit the $200 million. Receivables were a big positive at least on a GAAP basis. Anything else moving around in working capital that kind of overdrove at all or is this kind of bang in line with what you guys were expecting?

[Kristian Talvitie, Chief Financial Officer]

In general, I think it was largely in line with what we were expecting Steve. I mean again solid collections performance.

[Steve Tusa, JPMorgan]

Yeah. Okay.

[Jim Heppelmann, Chief Executive Officer]

Yes, it’s little bit Steve, like with the ARR situation where our guidance contains a little bit of a buffer and we didn't need it.

[Steve Tusa, JPMorgan]

Yes. Congrats on the good result. Thanks.

[Jim Heppelmann, Chief Executive Officer]

Great. Thank you.

[Operator]

Your next question comes from the line of Saket Kalia from Barclays. Your line is open.

[Jim Heppelmann, Chief Executive Officer]

Hello, Saket.

[Saket Kalia, Barclays]

Hey, Jim. Hey, Kristian. Thanks for taking my question here. Jim, maybe just -- I'd love to dig one level deeper just into sort of that dichotomy, right, the softer bookings but then also the lower churn. Maybe just on the softer bookings piece, are those deals that are pushing? Are those deals that are still in the pipeline, or are they ones that you think just get pushed indefinitely?

And then on the lower churn piece, that is great to hear, particularly with the hiring environment how much is maybe some of the price adjustments that we did last year maybe factoring into that as well?

[Jim Heppelmann, Chief Executive Officer]

Yes. Well, let me address the churn piece first and I'll circle back to the push or cancellation on bookings. On churn, you remember that we gave you scenarios that had churn getting worse, when we were clear, we have no evidence that that is happening or will happen, it just seems prudent to allow for the possibility. So, we're allowing for a possibility that would require a reversal in trend, but we did not get the reversal in trend. We got actually more of the same improving trend. And I think we were clear that certainly pricing helps, but it doesn't really account for the strength we're seeing. I mean the strength we're seeing is fundamentally just good renewals.

And to put it in perspective, Creo and Windchill, represent roughly 70% of our ARR just those two products. And if you took the churn rate for Creo and Windchill in the quarter and you annualized it for the entire year, it would be less than 3% churn on those two massive product bases. So I mean, we're talking about fundamentally strong adoption of our technology, mission-critical technology. You can't switch from it. You can't stop using it. You can't stop paying for it, I mean unless you're winding your business down. So, I think it's just good fundamental sticky software that people are continuing to use. And I think there's not really a lot of layoffs happening in our marketplace right now our customers. A lot of layoffs happening in tech, but I don't think so many engineers in the world of product development for physical products are getting laid off.

And then coming back to the push and cancel, I mean, I think it's mostly push. What happens is typically you've got a purchase order and it needs some level of approval. Maybe last quarter, it needed a higher level of approval, another signature maybe somebody sat on that signature because they're saying, couldn't we do this next quarter? Couldn't we start this project a little later? So I think it's pushing. There's no competitive dynamics. And generally it's not being canceled, because companies do need this technology. They're just delaying a little bit.

The second factor would be expansion, sometimes are driven by hiring. If a company is hiring a lot of engineers, well, now they need to go back and buy more CAD and PLM seats for those engineers. There probably is a slowdown in hiring, which is slowing down expansions, but nothing structural happening. It's just sort of the natural delays the cholesterol if you will that gets in the way of doing deals when people are getting nervous about the economy.

[Saket Kalia, Barclays]

Makes a lot of sense. Thanks, Jim.

[Operator]

Your next question comes from the line of Jay Vleeschhouwer from Griffin Securities. Your line is open.

[Jay Vleeschhouwer, Griffin Securities]

Thank you. Good evening. Jim for you first, over the last couple of years at least to the active bases for both Creo and Windchill have seemingly grown at least a mid-single-digit rate, at least by our calculation, which corresponds to the share gain for each we've been able to document. How are you thinking about the active base growth from here for both those products? And perhaps more broadly, since we've gone through so many evolutions of both those markets over the last many years, what from here do you think are the critical functionalities within CAD and PLM to continue or sustain the growth in those businesses, maybe GD or something else that you care to mention?

And then secondly, maybe for Kristian you've done well in terms of product releases, adhering to the road map, but you do have the smallest R&D budget in your peer group. So, how are you thinking about orchestrating or managing R&D productivity from here to keep executing on that road map in the context of containing your expenses?

[Jim Heppelmann, Chief Executive Officer]

Yes. Okay. You've got a couple of different questions for me there. Let me say, the wildcard Jay is what happens with the economy. There's nothing again structurally happening that would cause our share gain or our seat growth to differ from the trend as it has been other than just a macro slowdown. And in the past, like in 2020, when there was a macro slowdown then we had an acceleration on the back end of it. We had a tough quarter, I think it was Q3 right Kristian, yes, Q3 of 2020 and a monster quarter in Q4 and it was like a snapback to where we work. So, even if there's a slowdown, we might get that effect, but that's the wildcard. Otherwise nothing in the industry is happening that would in my view change the trend.

In terms of some of the critical functionality, yes, generative design is important. The ANSYS simulation is important. But the thing I think is really carrying the day is this concept that our guys call model-based enterprise. And what that really means is, companies are trying to make 2D drawings go away.

In the world of engineering, there has been forever a really messed up process, where engineers create 3D models to really conceptualize the parts and how they fit together and to simulate them with technologies like ANSYS and everything is done in 3D.

And then the very last step is, they convert that all to 2D drawings. They dumb it down and leave a lot of information behind and the drawings get sent out to the supply chain and to the factory and everything else.

And then, for example, at suppliers they get these drawings and they turn around and remodel them in 3D. And the factory gets the data and they might have to remodel, so they can generate tool paths off it and whatnot.

So the industry has said for a long time, we shouldn't need drawings, but we need to figure out how to get different processes that aren't so dependent on them, because all the procurement processes, the supplier collaboration processes are based on drawings and red lines and so forth.

So what's happening now is many, many companies are saying, okay, this is it. That drawing process has to go now. What we have to do is model it in 3D. It has to be 3D -- annotated 3D models go out to suppliers, annotated 3D models go down in the manufacturing process, annotated 3D models end up in the service process, there's not going to be any more drawings.

Now that requires a lot more adoption of CAD, because suddenly now a lot more people need a CAD suite rather than an Acrobat viewer, PDF suite, if you will. We're not just talking about viewing a PDF file; we're now talking about interacting directly with the 3D data. So I think that's a driver for the whole industry, but I certainly can tell you here at PTC, it's a driver. Many more suites of CAD software are sold when a company decides to move away from drawings.

And on their side, they can shut a whole department down. And it's a department that not only leaks value, it actually actively destroys it by dumbing data down that then has to be smartened back up by somebody else downstream.

So I think that's a big factor this model-based enterprise stuff. That's the whole capability around annotated 3D models and whatnot and viewing technologies and markup and collaboration. But certainly, generative design and simulation, 3D printing, additive manufacturing, those are all quite interesting as well.

Now, finally, on your last question about the smallest R&D budget. I'm an R&D guy, so I'm not going to lose and we have not been losing the product battle. We've actually been winning the product battle. And I think what it is, is just, R&D is not about body count, it's about strategy, it's about project selection, it's about execution.

Some of our larger competitors spend a lot of time and energy developing nonsensical products; products that don't work; don't make any sense. Autodesk was famous for that for many years. But some of our French and German competitors, French in particular, they've developed a lot of 3D experience, blah, blah, blah, that these are products that actually mean anything to anybody, but there's engineers working on them.

So, I think, at PTC, we're just much more serious, much more focused. We prioritize what we do. We execute it well. We don't get in too many rework loops. We're just very efficient. And I think that's the winning recipe.

Throwing bodies at R&D is not a winning strategy. Executing a good strategy efficiently is what it takes to win and we're doing fine in the product front. You know this. Our products are very strong and, if anything, getting stronger despite the fact that we spend less in R&D.

And then, finally, one last comment. It's not like we don't spend much on R&D. Creo has 500 engineers working on it. Windchill has 500 engineers working on it. If you have 1000 engineers on it you just have more people tripping all over each other. So I think also I don't want you to think we don't spend much. We're not quite as extravagant as other people, but we're executing very, very well within what is a substantial spend envelope.

[Jay Vleeschhouwer, Griffin Securities]

Thank you very much, Jim.

[Jim Heppelmann, Chief Executive Officer]

Thanks.

[Operator]

Your next question comes from the line of Adam Borg from Stifel. Your line is open.

[Adam Borg, Stifel]

Awesome. Thanks so much for taking the question. Maybe just two quick ones. Just first, Jim, just on the incremental softness you noted on the macro, it doesn't sound like things gotten any softer in the month of January. And of course, January is a smaller month to begin with, but just any commentary there on how demand trends have started so far in the month of January. And maybe just as a follow-up on ServiceMax, obviously it seems really compelling, just curious now that the acquisition closed, how early customer feedback is from both customers and prospects? Thanks so much.

[Jim Heppelmann, Chief Executive Officer]

Yeah. So on the first question, how's Q2 looking, at the start of the quarter here, we're more or less still at the start of the quarter because if you look at our quarter, a majority of our business is done in the third month of the quarter. So it's very difficult in the first month to really understand how things are trending. I mean we're starting the quarter with a decent pipeline. We're starting the quarter with a decent forecast. The real question will be in the last week or two of the quarter, are we able to close these deals or do they slide. If they slide, bookings will be soft again. If they close, actually we'll have a pretty stellar bookings quarter based on how things are forecasted at the moment or maybe we'll end up somewhere in between. What was the second question? Sorry, I didn't write it down.

[Adam Borg, Stifel]

No worries, just on ServiceMax.

[Jim Heppelmann, Chief Executive Officer]

ServiceMax, yes. So ServiceMax, I mean you see I'm very excited about it. You can probably sense that through the call here. That's because customers are very excited about it. I mean, we had a thesis of what this was going to mean. We've gotten into it. We found how many customers had independently purchased software from both of us, but also how many customers ServiceMax has that looked like PTC customers and how many customers PTC have that look like they should be ServiceMax customers. And a lot of common customers immediately contacted me, immediately contacted Neil and said "Hey can we get together? Can you fly out and see us? Can we come visit you? We want to hear this story."

To be honest, we're pushing back a little bit on them saying "Could you just give us a little bit of time to figure out the details?" So we're really targeting that for LiveWorx. I mean obviously, we'll talk to a lot of customers before LiveWorx, but that will be kind of the grand unveiling of that sort of infinity concept that I had on that slide. And I think it will be very exciting. I think there'll be many, many excited customers.

[Matt Shimao, Head of Investor Relations]

Rob, we have time for one final question today.

[Operator]

Your next question comes from the line of Jason Celino from KeyBanc Capital Markets. Your line is open.

[Jason Celino, KeyBanc Capital Markets]

Hey, Jim, hey, Kristian. Thanks for fitting me in. Maybe just a quick one. We've been hearing different customers and organizations trying to use PLM more within their organizations. When we think about the expansion, is it expanding to different departments and teams, or is it product development, just becoming a more critical role within an organization? I guess, how would you kind of quantify this secular dynamic?

[Jim Heppelmann, Chief Executive Officer]

Yeah. I think maybe a couple of thoughts. One thing I said Jason is that PLM is moving from a nice-to-have to a must-have, and for example, this concept I was talking about earlier model-based enterprise where you're going to interact with 3D models. And 3D models are too big to e-mail around. By the way, when you're interacting with a 3D design, it's not one file, it can be dozens, hundreds or thousands of files and you need a system to find them all and fit them together and present it to you so that you can understand what's going on.

So, I think what's happening this is all forms of digital transformation is that companies are saying, we're going to get rid of paper drawings and PDF files. We're going to go to 3D. Therefore everybody in the company who interacts with product data is going to need a PLM seat and they're going to need some type of a 3D seat. It might be a Viewer, it might be CAD, whatever. But it's driving proliferation of PLM out from the engineering department, where it's always been into purchasing into manufacturing now into the service technicians.

We pretty quickly envision service technicians out in the field on their phone interacting with 3D models when they're standing in front of a piece of equipment if not augmenting it right onto the piece of equipment. So, I think that's what's happening is it's becoming a true enterprise system versus a departmental system, while at the same time it's becoming a must-have rather than a nice-to-have. I think it's those trends that are really driving this proliferation of PLM, which frankly is good for the whole industry, but I think PTC is taking share in the industry at the same time.

[Jason Celino, KeyBanc Capital Markets]

Okay. Great. I guess we'll look forward to more at LiveWorx. Thanks.

[Jim Heppelmann, Chief Executive Officer]

Great. Okay. So, let me just wrap up here. Thank you all for spending time with us. In the next quarter, we have quite a busy investor schedule. So, I just want to share with you some of the things happening in case you want to participate.

So, Kristian and I together are going tomorrow and Friday, we’re going to -- tomorrow at dinner and Friday in the morning we're going to participate in an RBC roadshow in New York.

Then on February 27th, we're hosting a headquarters visit that JPMorgan is conducting here in Boston. On March 8th, we're both going to the Morgan Stanley TMT Conference in San Francisco.

Meanwhile on my own behalf, I'm going to the Wolfe Conference in New York on February 28th. Kristian additionally is going to the Baird Conference in Utah on March 2nd; to the JPMorgan Global High Yield Conference in Miami on March 6th. And Kristian's going on a Barclays Virtual Bus Tour or probably hosting a Barclays Virtual Bus Tour on March 15th.

And then one of our executives Kevin Wrenn, who's our Chief Product Officer is doing the Loop Virtual Conference on March 13th. So, lots of IR touch points here in the coming quarter. Hope to see many of you in the course of one or more of those events. And if not hope to catch you again in about 90 days on our Q2 earnings call. So, thanks again and have a good evening everybody.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect.