PTC Q1 Earnings Call Highlights

Core Viewpoint - PTC is experiencing a transformative phase with positive momentum in product offerings, market strategies, and customer engagement, as indicated by several key performance indicators [1] Financial Performance - In the fiscal first quarter, PTC reported a constant-currency Annual Recurring Revenue (ARR) growth of 9% year-over-year excluding Kepware and ThingWorx, and 8.4% including these businesses [2][6] - Free cash flow increased by 13% year-over-year to $267 million, which included $10 million in divestiture-related costs [2][6] - Management raised fiscal 2026 revenue guidance to between $2.675 billion and $2.940 billion and increased non-GAAP EPS guidance to a range of $6.69 to $9.15 [19] Product and AI Strategy - PTC is integrating its product portfolio and has launched new AI initiatives, including Codebeamer AI and Windchill AI Parts Rationalization, aimed at enhancing product lifecycle management [4][8] - The company is building a common AI infrastructure to support consistent product data usage across its offerings, with an emphasis on governance and security [9] Deferred ARR and Demand Capture - PTC reported record deferred ARR, with expectations that much of this will convert to ARR in fiscal 2027-2028, indicating a timing issue rather than a lack of demand [5][11] - The deferred ARR entering Q4 of fiscal 2026 is expected to be about triple compared to the previous year, with deferred ARR for 2027 being double that of fiscal 2026 [12][13] Go-to-Market Execution - Management highlighted improvements in seller productivity and quota attainment, attributing these gains to territory rebalancing and enhanced vertical focus [10] - The company achieved a record first quarter for large deal volume and competitive displacements, with many contracts expected to convert to ARR in the upcoming fiscal periods [11][14] Capital Return Plans - PTC repurchased $200 million of common stock in Q1 and plans to repurchase approximately $250 million in Q2, with expectations of total buybacks reaching $1.1 billion to $1.3 billion after the divestiture [15][16] Guidance - For Q2, PTC expects constant-currency ARR growth of about 8% to 8.5% excluding Kepware and ThingWorx, and about 7.5% to 8% including them [17] - Free cash flow guidance for Q2 is projected to be between $310 million and $315 million, with expectations of about $1 billion in free cash flow for fiscal 2026 [18]