Summary of PTC FY Conference Call - August 13, 2025 Company Overview - **Company**: PTC (PTC) - **Event**: Oppenheimer Virtual Tech Conference - **Date**: August 13, 2025 Key Points Industry and Market Environment - The macro environment remains challenging but has not materially worsened, leading to a stable outlook for PTC [10][12][13] - There was initial caution among customers at the start of the quarter due to uncertainty surrounding "Liberation Day" [5][6] - PTC's revised guidance reflects a more stable outlook, with net new Annual Recurring Revenue (ARR) coming in at the high end of expectations [8][9] Financial Performance - PTC achieved near the high end of its guidance range for net new ARR, indicating alleviation of worst-case fears [8] - The company is on track to meet its $1 billion free cash flow target for the next fiscal year, despite currency and tax fluctuations [52][58] Go-to-Market Strategy - PTC has made significant changes to its go-to-market strategy, focusing on core verticals and aligning sales, marketing, and customer success teams [17][21] - The restructuring involved account reshuffling and hiring to optimize territory coverage [20][21] - Ongoing efforts include refining messaging for verticals and enhancing pipeline management [23][24] Product Development and AI Integration - PTC views Product Lifecycle Management (PLM) as a strategic imperative for customers, emphasizing the need for faster and more sophisticated product development [34] - The company is in the early stages of integrating AI into its products, with plans for broader AI capabilities to be rolled out in the near future [47][48] - Monetization strategies for AI are still being developed, with current offerings priced on a per-seat basis [50] Customer Engagement and SaaS Transition - There is growing customer interest in SaaS as a delivery model, although migration involves significant organizational change management [40][41] - PTC aims to balance the needs of existing on-premise customers while facilitating the transition to SaaS [42] Future Outlook - PTC is evaluating its growth profile in light of the current macro environment, with a focus on driving net new ARR growth through strategic initiatives [32][33] - The company plans to provide guidance for fiscal 2026 during the Q4 results announcement [59] Capital Allocation - PTC aims to operate in a net debt position and prioritize returning excess cash to shareholders through share repurchases [61] Additional Insights - The company is addressing elevated churn related to specific product lines and customer situations, with some contracts expected to return by the end of the year [35][36] - PTC is actively managing foreign exchange impacts and tax changes to mitigate financial headwinds [54][56] This summary encapsulates the key discussions and insights from the PTC conference call, highlighting the company's strategic direction, financial performance, and market positioning.

Core Insights - PTC has appointed Jon Stevenson as Executive Vice President and Chief Product Officer, responsible for the strategy, development, and delivery of the Digital Thread product portfolio [1][2] - Stevenson has over 30 years of experience in product development and technology innovation, previously holding executive roles at Stratasys and GrabCAD, and has served as a board member and advisor to various companies [1][2] - The previous Chief Product Officer, Kevin Wrenn, is transitioning to a new leadership role focused on enhancing customer engagement within PTC's product organization [2] Company Overview - PTC is a global software company headquartered in Boston, Massachusetts, specializing in enabling manufacturers and product companies to digitally transform their design, manufacturing, and service processes [3] - The company employs over 7,000 people and supports more than 30,000 customers worldwide [3]

Core Viewpoint - PTC Inc. has received an upgrade to a Zacks Rank 1 (Strong Buy) due to an upward trend in earnings estimates, indicating a positive outlook for the company's stock price [1][3]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in a company's earnings picture, which significantly influences stock price movements [2][4]. - Rising earnings estimates for PTC Inc. suggest an improvement in the company's underlying business, likely leading to an increase in stock price [5][10]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - Only the top 5% of Zacks-covered stocks receive a "Strong Buy" rating, indicating superior earnings estimate revisions [9][10]. Earnings Estimate Revisions for PTC Inc. - PTC Inc. is expected to earn $6.69 per share for the fiscal year ending September 2025, with no year-over-year change [8]. - Over the past three months, the Zacks Consensus Estimate for PTC Inc. has increased by 14.7%, reflecting analysts' positive revisions [8].

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates is challenging due to inherent risks and volatility [1] Group 1: Company Overview - PTC Inc. is highlighted as a recommended growth stock based on the Zacks Growth Style Score, which evaluates a company's growth prospects beyond traditional metrics [2] - The company has a favorable Growth Score and a top Zacks Rank, indicating strong potential for performance [2] Group 2: Earnings Growth - PTC Inc. has a historical EPS growth rate of 13.8%, with projected EPS growth of 21.7% for the current year, significantly surpassing the industry average of 12.1% [5] Group 3: Cash Flow Growth - The year-over-year cash flow growth for PTC Inc. stands at 18.6%, exceeding the industry average of 9.4% [6] - Over the past 3-5 years, the company's annualized cash flow growth rate has been 25.7%, compared to the industry average of 10.8% [7] Group 4: Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for PTC Inc., with the Zacks Consensus Estimate for the current year increasing by 16.6% over the past month [8] Group 5: Conclusion - PTC Inc. has achieved a Growth Score of A and a Zacks Rank of 2, indicating it is a strong candidate for growth investors [9][10]

Core Viewpoint - PTC Inc. shows a significant improvement in earnings outlook, making it an attractive investment option as analysts continue to raise earnings estimates for the company [1][2]. Earnings Estimates - Analysts' optimism regarding PTC's earnings prospects is leading to higher estimates, which is expected to positively impact the stock price [2]. - The Zacks Rank system indicates a strong correlation between earnings estimate revisions and stock price movements, with PTC benefiting from this trend [2][3]. Current Quarter Estimates - For the current quarter, PTC is projected to earn $2.01 per share, reflecting a year-over-year increase of +30.5% [6]. - The Zacks Consensus Estimate for the current quarter has risen by 10.17% over the last 30 days, with no negative revisions reported [6]. Current Year Estimates - For the full year, PTC is expected to earn $6.18 per share, representing a year-over-year change of +21.7% [7]. - The consensus estimate for the current year has increased by 16.57%, supported by two upward revisions and no negative changes [7][8]. Zacks Rank - PTC has achieved a Zacks Rank 2 (Buy), indicating favorable estimate revisions that enhance its investment appeal [9]. - Stocks with Zacks Rank 1 (Strong Buy) and 2 (Buy) have historically outperformed the S&P 500, suggesting a positive outlook for PTC [9]. Stock Performance - PTC shares have increased by 23.8% over the past four weeks, indicating strong investor confidence in the company's earnings growth prospects [10].

Core Insights - Zacks Premium offers various tools for investors to enhance their stock market strategies, including daily updates, research reports, and stock screens [1][2] Zacks Style Scores - Zacks Style Scores are indicators that rate stocks based on value, growth, and momentum methodologies, helping investors identify stocks likely to outperform the market in the short term [2][3] - Each stock receives a rating from A to F, with A indicating the highest potential for outperformance [3] Value Score - The Value Style Score focuses on identifying undervalued stocks by analyzing financial ratios such as P/E, PEG, and Price/Sales [3] Growth Score - The Growth Style Score assesses a company's financial health and future growth potential by examining projected and historical earnings, sales, and cash flow [4] Momentum Score - The Momentum Style Score identifies optimal entry points for stocks based on price trends and earnings estimate changes [5] VGM Score - The VGM Score combines the Value, Growth, and Momentum Scores, providing a comprehensive assessment of stocks based on multiple investment styles [6] Zacks Rank - The Zacks Rank is a proprietary model that utilizes earnings estimate revisions to guide investors in building successful portfolios, with 1 (Strong Buy) stocks achieving an average annual return of +23.75% since 1988 [7][9] - There are over 800 stocks rated 1 or 2, making it essential for investors to use Style Scores to narrow down their choices [8] Stock Highlight: PTC Inc. - PTC Inc., a software provider based in Boston, MA, is rated 2 (Buy) on the Zacks Rank and has a VGM Score of B [11] - The company is projected to experience a year-over-year earnings growth of 21.7% for the current fiscal year, supported by a Growth Style Score of A [12] - Recent earnings estimates for fiscal 2025 have been revised upward, with the Zacks Consensus Estimate increasing by $0.09 to $6.18 per share, and PTC has an average earnings surprise of +23.2% [12]

Revenue Growth - ARR (Annual Run Rate) increased by 14% to $2.42 billion as of Q3'25 compared to Q3'24, with a 9% growth on a constant currency basis [91]. - Total revenue grew by 24% to $644 million in Q3'25 compared to Q3'24, with a 22% increase on a constant currency basis [93]. - Software revenue increased by 27% to $621.3 million in Q3'25 compared to Q3'24, driven by a 69% growth in license revenue [104]. - Total recurring revenue rose by 27% to $613.6 million in Q3'25 compared to Q3'24 [96]. - Software revenue for Q3'25 reached $621.3 million, a 27% increase from $488.6 million in Q3'24, with a 12% growth for the first nine months of FY'25 [107]. - PLM ARR grew 14% (10% constant currency) from Q3'24 to Q3'25, driven primarily by Windchill and Codebeamer [108]. Profitability - Operating income surged by 119% to $209.8 million in Q3'25 compared to Q3'24, reflecting a significant increase in operating margin by 1410 basis points [93]. - Diluted earnings per share rose by 106% to $1.17 in Q3'25 compared to Q3'24 [93]. - Total gross margin for Q3'25 was $533.9 million, a 31% increase from $406.7 million in Q3'24, with a gross margin percentage of 83% [109]. - Income before income taxes for Q3'25 was $193.7 million, a 187% increase from $67.4 million in Q3'24 [123]. - The effective income tax rate for Q3'25 was 27%, significantly higher than the -2% rate in Q3'24, due to changes in the geographic mix of income [123]. - Non-GAAP net income for the nine months ended June 30, 2025, was $547.5 million, compared to $427.3 million for the same period in FY'24 [153]. - GAAP diluted earnings per share for the nine months ended June 30, 2025, was $3.20, up from $2.07 in the same period of FY'24 [153]. - The company reported a GAAP operating margin of 29.7% for the nine months ended June 30, 2025, compared to 23.6% for the same period in FY'24 [154]. Cash Flow and Debt Management - Cash provided by operating activities grew by 14% to $244 million in Q3'25 compared to Q3'24 [92]. - Free cash flow increased by 14% to $242 million in Q3'25 compared to Q3'24 [92]. - Cash and cash equivalents as of June 30, 2025, were $199.3 million, down from $265.8 million on September 30, 2024 [131]. - Net cash provided by operating activities for the nine months ended June 30, 2025, was $763.7 million, compared to $651.9 million for the same period in FY'24 [131]. - Cash provided by operating activities increased by $111.8 million in the first nine months of FY'25 compared to the same period in FY'24, driven by higher collections and lower interest payments [134]. - Total debt as of June 30, 2025, was $1,236.3 million, down from $1,752.6 million as of September 30, 2024 [137]. - The company repaid $157 million of debt and repurchased $75 million of outstanding shares in Q3'25 [92]. - The company intends to repurchase approximately $300 million of its common stock in FY'25 as part of its long-term goal to return excess cash to shareholders [140]. Operating Expenses - Operating expenses increased by 4% in Q3'25 to $324.1 million compared to $310.9 million in Q3'24, primarily due to a $9 million increase in total compensation expense [115]. - Interest expense decreased by 34% in Q3'25 to $18.4 million from $27.8 million in Q3'24, attributed to lower debt balances and interest rates [117]. Investment Activities - Cash used in investing activities in the first nine months of FY'25 was primarily due to outflows from the settlement of net investment hedges, while FY'24 was driven by the acquisition of pure-systems for $93.5 million [135]. Financing Activities - Cash used in financing activities in the first nine months of FY'25 included net payments of $516.7 million on outstanding debt and the repurchase of $225.0 million of common stock [136]. Market Risk - There have been no significant changes in market risk exposure as described in the 2024 Annual Report on Form 10-K [155].

Core Insights - PTC Inc. reported third-quarter fiscal 2025 non-GAAP EPS of $1.64, exceeding the Zacks Consensus Estimate by 34.4% and up from 98 cents in the prior-year quarter [1][9] - Revenues reached $644 million, a 24% year-over-year increase, surpassing the consensus estimate by 10.6% [2][9] - The company is focusing on digital product innovation and transitioning to SaaS and subscription models, which is establishing a stable revenue base [2][3] Financial Performance - Recurring revenues were $613.6 million, up 27.4% year over year, while perpetual licenses increased by 10.1% to $7.8 million [6] - License revenues accounted for 39% of total revenues at $251.5 million, a 68.6% increase from the previous year, while support and cloud services revenues rose 8.9% to $370 million [7] - PLM revenues were $404 million, growing 23% year over year, and CAD revenues were $240 million, up 27% [10] Operating Metrics - Total operating expenses were $324 million, compared to $310.9 million in the prior-year quarter, with non-GAAP operating income rising to $285.2 million from $164.4 million [12] - The non-GAAP operating margin increased by 1,260 basis points year over year to 44% [12] Cash Flow and Balance Sheet - As of June 30, 2025, cash and cash equivalents were $199 million, down from $235 million as of March 31, 2025, while total debt decreased to $1.23 billion from $1.54 billion [13] - Cash provided by operating activities was $244 million, up from $214 million in the prior-year quarter, and free cash flow was $242 million compared to $212 million [13] Shareholder Returns - During the fiscal third quarter, PTC repurchased $75 million worth of its stock as part of a $300 million buyback plan for fiscal 2025 [14] Future Guidance - PTC now projects fiscal 2025 revenues in the range of $2,570 to $2,630 million, indicating a 12-14% year-over-year increase, and non-GAAP EPS is estimated to be between $6.63 and $7.03, suggesting a rise of 31-38% [15] - For the fourth quarter of fiscal 2025, revenues are estimated to be between $725 and $785 million, with non-GAAP EPS projected in the range of $2.10 to $2.50 [17]

Core Insights - PTC Inc. reported revenue of $643.94 million for the quarter ended June 2025, marking a year-over-year increase of 24.2% and exceeding the Zacks Consensus Estimate of $582.4 million by 10.57% [1] - The company's EPS for the same period was $1.64, up from $0.98 a year ago, representing an EPS surprise of 34.43% compared to the consensus estimate of $1.22 [1] Financial Performance Metrics - Annual Recurring Revenue (ARR) was reported at $2.42 billion, surpassing the average estimate of $2.36 billion from three analysts [4] - Recurring Revenue reached $613.58 million, exceeding the four-analyst average estimate of $549.76 million, with a year-over-year change of 27.4% [4] - Professional Services Revenue was $22.59 million, below the average estimate of $28.18 million, reflecting a year-over-year decline of 24.8% [4] - Perpetual License Revenue was reported at $7.76 million, exceeding the average estimate of $6.27 million, with a year-over-year increase of 10.1% [4] Stock Performance - PTC Inc. shares have returned +18% over the past month, significantly outperforming the Zacks S&P 500 composite's +3.4% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Group 1 - PTC Inc. reported quarterly earnings of $1.64 per share, exceeding the Zacks Consensus Estimate of $1.22 per share, and showing an increase from $0.98 per share a year ago, resulting in an earnings surprise of +34.43% [1][2] - The company achieved revenues of $643.94 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 10.57%, compared to $518.64 million in the same quarter last year [2] - PTC Inc. has consistently outperformed consensus EPS and revenue estimates over the last four quarters [2][6] Group 2 - The stock has gained approximately 11.1% since the beginning of the year, outperforming the S&P 500's gain of 8.3% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4][7] - The current consensus EPS estimate for the upcoming quarter is $1.96 on revenues of $709.64 million, and for the current fiscal year, it is $6.09 on revenues of $2.49 billion [7] Group 3 - The Computer - Software industry, to which PTC Inc. belongs, is currently ranked in the top 21% of over 250 Zacks industries, indicating a favorable outlook for the sector [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5][6]