• ARR (Annual Recurring Revenue): $2.277 billion, up 11% year over year on a constant currency basis.
• Free Cash Flow: $236 million in Q1, up 29% year over year.
• Cash and Cash Equivalents: $196 million at the end of Q1.
• Gross Debt: $1.548 billion, with a leverage ratio of 1.7 times.
• Share Repurchase: $75 million used to repurchase 383,000 shares in Q1.
• Guidance for Fiscal '25: ARR growth of approximately 9% to 10%; Free cash flow of $835 million to $850 million.
• Q2 Free Cash Flow Guidance: Approximately $270 million.
• Debt Repayment: $205 million paid down in Q1.

• Warning! GuruFocus has detected 5 Warning Sign with PTC.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PTC Inc (NASDAQ:PTC) reported first-quarter results slightly better than anticipated, demonstrating resilience in a challenging macro environment.
• The company has made significant progress in reshaping its go-to-market strategy to be vertically oriented, energizing both the team and customers.
• PTC Inc (NASDAQ:PTC) is focusing on five core areas of its product portfolio, which are expected to create significant customer value, including PLM, ALM, SLM, CAD, and SaaS.
• The company is actively integrating AI into its offerings, with new AI-powered features launching soon, starting with ServiceMax.
• PTC Inc (NASDAQ:PTC) has a strong cash flow position, with a 29% year-over-year increase in free cash flow, and is actively repurchasing shares under a $2 billion share repurchase program.

Negative Points

• PTC Inc (NASDAQ:PTC) continues to face a sluggish selling environment, impacting close rates and necessitating a back-half loaded year for growth.
• The company's go-to-market changes are expected to take time to fully realize their intended effects, potentially delaying growth momentum until later in the fiscal year.
• There is ongoing pressure from foreign exchange fluctuations, which could impact cash flow guidance.
• PTC Inc (NASDAQ:PTC) is experiencing some churn in contracts, although these are expected to return to ARR later in the fiscal year.
• The company acknowledges that its net new ARR can be volatile due to various factors, including the timing of bookings and renewals.

Q & A Highlights

Q: Can you elaborate on how PTC is organizing and investing in AI products? Is there a central AI group managing these developments? A: Neil Barua, CEO: We are evolving our approach to AI. Initially, teams self-introduced and experimented with AI technologies. Now, we are aligning a group to ensure consistency across AI innovations in our product segments. This evolution is based on customer feedback and the rapid changes in the AI space.

Q: How is PTC positioned in the competitive PLM market, especially with competitors like Dassault and Siemens? A: Neil Barua, CEO: PTC is actively competing in the PLM market. Our strategy focuses on integrating Windchill and Codebeamer with CAD systems, differentiating us from competitors who focus more on manufacturing. We aim to democratize product data across enterprises, leveraging our unique approach.

Q: With the go-to-market changes, what progress has been made, and are there any disruptions in sales? A: Neil Barua, CEO: We have made significant progress, including verticalizing our go-to-market approach and bringing in Rob Dahdah as CRO. While there have been changes, we anticipated potential impacts and structured our guidance accordingly. The foundation is set, and we expect to gain momentum in the coming quarters.

Q: How does AI impact customer decisions and budgets, and what is PTC's role in this transformation? A: Neil Barua, CEO: Many customers need to establish structured data systems before applying AI. This creates opportunities for PTC as customers seek to implement enterprise PLM and Codebeamer. Our AI offerings, like Codebeamer AI, are designed to enhance these systems, encouraging customers to adopt our solutions.

Q: What is the growth potential of PTC's core product areas, and how do they contribute to overall growth? A: Neil Barua, CEO: PLM, especially when integrated with Codebeamer, is a significant growth driver. We see potential for increased growth rates as we refine our vertical approach and messaging. While ALM, SLM, and SaaS are also growth areas, PLM remains a core focus with substantial opportunities for expansion.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.