Neil Barua: Great question, Matt. Thanks for asking it. It’s important to us. Let me just make sure I reiterate this. We have a view, I have a view, that was consistent with Jim’s view that the industry will go do SaaS. That’s an inevitability. As I said, we believe it’s going to be, in my estimation, a 10-plus-year journey. It could be wrong, it could move faster, could take a little bit longer. But the way in which we’re thinking about it here, with already some momentum built, particularly in Windchill+, Creo+ we launched a couple of quarters ago, we’re building with customers already, the resilience, the scalability, the repeatability of a SaaS offering by which when other customers of similar complexity or size or segments are ready to take it on, we have built the strength and the capabilities to do that.
And so, the way in which we’re doing is, we’re not taking any foot off the accelerator in terms of our focus, energy, investment into our plus strategy. But we do want to force customers, different than others out there, but it’s very important philosophically as you ask for us to have a way in which we work with our customers as they need to migrate for their value prop to move from an on-prem system to a SaaS offering, we will be there hand-in-hand to do that. And our ultimate belief is, that will reward us in a meaningful way. When the dam breaks, we might — we will not only get the conversion of our existing on-prem customers to the SaaS offering, but have a differentiated offer for those in other competitive environments that might want to move to the best-in-class solution at PTC.
Matt Hedberg: Got it. Thanks a lot. Super helpful.
Operator: And your next question comes from the line of Adam Borg with Stifel. And Adam, your line is now open.
Adam Borg: Awesome. Thanks so much for taking the questions. Maybe for Neil, it was pretty interesting when you talked in your script about focusing resources towards the highest priority areas. A lot of focus, obviously, on PLM, the upsell opportunities you’ve had. Maybe talk a little bit about IoT and AR and how you’re thinking about those opportunities? And then, I have a quick follow-up.
Neil Barua: Yes. Very important question. And to be clear, I’m going to be very consistent around making sure, across the broad portfolio of capabilities we have, to make sure with all of you, we focus in not only internally, but as we report our messaging to you around the largest value creation from an aggregate dollar perspective, those priorities, which I made around PLM, SLM, with ServiceMax, ALM, the CAD piece of it as well as how we transition our customers to SaaS. That doesn’t mean IoT, AR, Servigistics Arbortext, FlexPLM aren’t important. I have and we have leaders there, capable leaders working through that, many of which are important to our digital thread, many of which of those products are important to industrial manufacturers going through a digital transformation.
And what I meant by prioritization and focus is as a general way in which the company has done for many years now, during the planning process, I’m making sure with the team here that, like I said, we put more wood behind the arrows that create the highest value creation opportunities and make sure those that might not have as strong of an outlook or have a different investment profile, we look at that with the time horizon and make the right concise decision to prioritize where we put the investment dollars, and where we may want to de-prioritize a few of those based on the outlook of that business. Right now, we have a very broad portfolio, I feel good about it. But, we’ve been doing it consistently over the last three years just making sure we’re placing the next incremental dollar in the highest value creation opportunities, going forward.
Adam Borg: Incredibly helpful. I really appreciate that. Maybe just a quick follow-up for Kristian just on the model. I think the guidance implies on OpEx, a 200-basis-point increase in OpEx spend relative to the guidance you talked about 90 days ago. Maybe talk a little bit more about what are the areas that you’re looking to drive increased investments? Thanks so much.
Kristian Talvitie: Yes. Hey, Adam, it’s Kristian. No, I mean, I think that our OpEx guidance for the year is pretty well in line — it remains unchanged from really what we would have said 90 days ago. In terms of areas where we’re investing incrementally this year, it’s what we’ve been talking about. There’s ALM in particular, there’s some investments into SaaS, which includes Windchill+, includes Creo+, actually includes some Atlas those are areas where we’ve got incremental investment going this year. But in terms of change to the investment profile from last quarter, I’m not sure I’m tracking with you.
Adam Borg: Got it. We can talk more offline. Thanks so much.
Operator: And your next question comes from the line of Joe Vruwink with Baird. Joe, your line is open.
Joe Vruwink: Great. Thanks for taking my question, and also wanted to extend my best wishes to Jim. Another one on just maybe more recent performance. So 1Q was a good quarter for new ARR added. You finished above guidance. I think, you grew that line 20% year-on-year. Anything to call out just in terms of what drove the upside in the 1Q plan? And then, maybe looking to 2Q, any discrete factors that would explain kind of a year-over-year decline in new ARR added? Or maybe relatedly, is deferred ARR factoring any more or less in the outlook today?
Kristian Talvitie: Yes. Hey, it’s Kristian. Thanks. Good question. So again, I think Q1, again, despite a challenging environment, I think we executed well. I think that across geographies, across product segments, hopefully, that showed through in our results. As far as the full-year is concerned, again, we are maintaining our full-year guidance, as we start looking at Q2 here. I think, we’re just trying to be prudent on the immediate-term outlook. But as a reminder, I guess, for everybody as it gets back to the — there’s ARR and then there’s cash flow. And on the cash flow side of things, whether there could be more volatility on ARR on the cash flow side of things, both from a quarterly and annual guidance perspective, I think, we feel very good about that guidance. But otherwise, I think seasonality is kind of in line with last year from an ARR perspective, taking into account the incremental deferred we’ve talked about ad Nauseam.
Joe Vruwink: Okay. Great. Thank you.
Operator: And your next question comes from the line of Tyler Radke with Citi. And Tyler, your line is now open.
Tyler Radke: Thanks so much for the question and congrats to you, Neil, and Jim. Look forward to the next journey here. Neil, you talked about how you made a number of observations across the product portfolio in your time here. One of the things that stood out to me was on your comments on the SaaS transition, kind of talking about it as a 10-year journey. I think in the past, PTC had talked about it, maybe a little bit more medium-term than that. So I’m just wondering, and maybe the question is for Kristian, is there any impact we should think about on the medium or long-term financial targets, as it relates to that? And then conversely, what are you seeing on the on-prem side maybe that surprised you to the upside that’s giving you that confidence, that it’s about a little bit of a longer time frame? Thank you.
Neil Barua: Hey, Tyler. So let me try, and then Kristian could add to this. The two actually are related, your two questions. And as you know, the on-prem business is delivering really solid growth. And one of the reasons why we talk about PLM, PLM expansion, we are still in the early innings of PLM, as I mentioned in the prepared remarks, in the early innings of being the system of record for product data across our customer base. It is happening in many cases. But there is, as far as the eye can see, in all the travels Jim and I have been doing to meet with customers, it is now happening. And so — and this is based on our on-premise Windchill systems. So that gives the confidence as we think through structuring, scaling, enabling our sellers, the marketing around it, to make Windchill that system of record for product data that we’re seeing in already some of our customers, that’s why I have the confidence around really putting the wood behind the arrow around that initiative, combined with the ALM initiative that has a very interesting growth factor that we talked about, that is predominantly on-premise.
