Core Viewpoint - PTC has updated its fiscal 2026 free cash flow expectations following the divestiture of its Kepware and ThingWorx businesses, with a focus on utilizing the majority of free cash flow for share repurchases [1][4][5]. Financial Updates - Estimated net after-tax transaction proceeds from the divestiture are now $375 million, an increase of $10 million from the previous estimate of $365 million [1]. - Cash taxes related to the transaction are now expected to be approximately $110 million, down $15 million from the prior estimate of $125 million [2]. - Divestiture-related costs are now expected to be approximately $40 million, up $5 million from the prior estimate of $35 million [2]. - Transaction proceeds from the sale were $523 million, which is $2 million below the prior estimate of $525 million due to working capital and indebtedness adjustments [2]. Free Cash Flow Guidance - Post-divestiture free cash flow guidance for fiscal 2026 has been raised to $850 million, which is $10 million higher than the previous estimate of $840 million [5][6]. - Cash inflows from the transition services agreement (TSA) with TPG are expected to largely offset the absence of cash flow from Kepware and ThingWorx in fiscal 2026, but create an estimated $70 million free cash flow headwind in fiscal 2027 [5][7]. Capital Allocation - PTC intends to use the majority of its free cash flow for share repurchases, targeting total buybacks of $1.125 to $1.225 billion [4][12]. - The company is no longer including Kepware and ThingWorx in its guidance for annual recurring revenue (ARR) [8][9]. Tax and Operating Expenses - PTC expects its cash tax rate to migrate toward its GAAP P&L tax rate over the midterm, with fiscal 2026 cash taxes projected between $130 million to $150 million and fiscal 2027 cash taxes between $180 million to $220 million [10][16]. - Non-GAAP operating expenses are expected to grow at roughly half the rate of ARR, indicating ongoing efficiencies and potential reallocation of investment [11].

Summary of PTC Conference Call Company Overview - **Company**: PTC (NasdaqGS:PTC) - **Industry**: Software solutions for product lifecycle management (PLM), computer-aided design (CAD), application lifecycle management (ALM), and service lifecycle management (SLM) across various sectors including industrial manufacturing, aerospace and defense, electronics, medical technology, and automotive [2][4][10] Core Points and Arguments Intelligent Product Lifecycle Vision - PTC emphasizes the importance of product data as a critical asset for product companies, advocating for the establishment of a strong product data foundation using their core solutions [4][5] - The integration of AI on top of this data foundation is seen as essential for enhancing competitiveness and operational efficiency [5][7] AI and Competitive Advantage - PTC claims a unique position in enabling AI for their customers, particularly in training AI agents on complex CAD models, which is a significant differentiator in the market [7][8] - Customers have recognized PTC's capabilities after exploring other solutions, leading to increased demand for PTC's AI-enabled offerings [8][10] Go-to-Market Transformation - The company has undergone a significant transformation in its go-to-market strategy, focusing on core fundamentals and vertical expertise, which has resulted in improved customer understanding and demand capture [11][12] - PTC is seeing a shift from tactical feature discussions to strategic partnerships with customers, indicating a deeper engagement [12] Financial Dynamics - Deferred Annual Recurring Revenue (ARR) is increasing due to strategic deals that consolidate PLM systems, leading to larger commitments from customers [13] - The company is aligning its sales and customer success teams to ensure effective implementation of solutions, which is expected to enhance customer satisfaction and retention [13] Competitive Landscape - PTC positions itself as a leader in the PLM and CAD markets, with a focus on customer-first solutions that outperform competitors' offerings [14][15] - The company is experiencing competitive displacement in both PLM and ALM sectors, aided by the modern capabilities of its Onshape CAD tool [15][16] Portfolio Rationalization - PTC divested from ThingWorx and Kepware to focus on its core strengths in product data management and AI, allowing for clearer strategic direction [23][24] - The divestiture is expected to enhance PTC's ability to deliver on its intelligent product lifecycle promise [26] Future M&A Strategy - PTC is open to tuck-in acquisitions that align with its strategic goals, focusing on enhancing its existing capabilities without disrupting organizational dynamics [31][33] Capital Allocation - The new CFO is emphasizing efficient resource allocation and ROI, with a focus on maintaining discipline in capital expenditures [35][36] - Proceeds from divestitures will be used strategically to enhance shareholder value and support growth initiatives [38] Macro Environment and Customer Trends - PTC is observing positive trends in demand across various geographies, particularly in North America, driven by local manufacturing initiatives and modernization efforts [40][44] - The company is optimistic about overcoming tariff uncertainties that may be hindering faster growth in North America [46] Internal Use of AI - PTC is leveraging AI internally to improve efficiency in engineering, customer support, and other functions, aiming to enhance overall operational effectiveness [48][51] Additional Important Insights - PTC's Onshape and Creo products are experiencing significant growth, with Onshape being particularly successful in sectors like robotics [58][59] - The company is committed to integrating its cloud offerings (Windchill Plus) with on-premise solutions to provide customers with flexible options [62][63] - PTC's leadership is focused on maintaining momentum and cultural alignment as the company evolves, aiming to position itself as a leading enterprise software provider [70][71]

Core Insights - PTC Inc. has launched a fully cloud-native Model-Based Definition (MBD) capability within its Onshape CAD and PDM platform, allowing engineering teams to integrate manufacturing information directly into 3D models from the early stages of product development [1][9] - The MBD functionality centralizes real-time product data on AWS, reducing errors and expediting the transition from design to production [2][9] - PTC has raised its fiscal 2026 revenue and EPS outlook following strong growth in PLM and CAD revenues, which were $432 million and $254 million respectively, reflecting year-over-year increases of 22% and 20% [7][8][9] MBD Capabilities - The new MBD functionality allows engineers to incorporate geometric dimensioning and tolerancing (GD&T), weld symbols, and datums directly into 3D models, eliminating the need for separate 2D drawings [3] - A Smart Inspection Panel compiles product manufacturing information (PMI) into a structured list, enhancing collaboration through secure URLs that maintain views and markups [3][4] - MBD annotations are connected to the feature tree, ensuring specifications align with the correct geometry as designs evolve, and support compliance workflows through integration with industry tools [4] Strategic Positioning - PTC's comprehensive product portfolio positions it well to enhance operational efficiency and accelerate innovation across industrial enterprises [7] - The company’s cloud-native MBD is seen as a significant step towards a fully digital and intelligent product lifecycle, leveraging AWS infrastructure for improved collaboration [6] - For fiscal 2026, PTC anticipates revenues between $2,675 million and $2,940 million, indicating a year-over-year increase of 2% to 7% [8]

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]

Financial Data and Key Metrics Changes - The company reported a constant currency ARR of $2.341 billion, up 9% year-over-year excluding Kepware and ThingWorx, and $2.5 billion, up 8.4% including them [17][5] - Free cash flow grew 13% year-over-year, reaching $267 million in Q1 2026 [17][5] - The company repurchased $200 million of common stock in Q1 under a $2 billion share repurchase authorization [18] Business Line Data and Key Metrics Changes - The company experienced record deferred ARR under contract, with a significant increase in large deal volume and competitive displacements [13][14] - The Intelligent Product Lifecycle vision is resonating with customers, leading to stronger demand capture across product lines [25][15] Market Data and Key Metrics Changes - The company noted that customer demand for AI capabilities is increasing, with a focus on embedding AI into existing systems rather than standalone solutions [10][36] - The company is seeing good traction in new customer acquisitions, particularly in the cloud environment, which is becoming the default for new logos [70] Company Strategy and Development Direction - The company is focused on transforming its go-to-market strategy to capture demand holistically across the product lifecycle [12][14] - The strategy emphasizes the integration of AI into core products, enhancing customer workflows and decision-making processes [8][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the transformation progress and the demand being captured, indicating a strong outlook for future growth [15][5] - The company anticipates a significant increase in deferred ARR starting in Q4 2026, driven by successful go-to-market initiatives [21][22] Other Important Information - The company is targeting to close the divestiture of Kepware and ThingWorx on or before April 1, with expected net after-tax proceeds of approximately $365 million [18][23] - The fiscal 2026 revenue guidance has been raised to a range of $2.675 billion to $2.940 billion, with non-GAAP EPS guidance also increased [24] Q&A Session Summary Question: What level of visibility do you have on deferred ARR deals for Q4? - Management indicated that there is triple the amount of deferred ARR on the books for Q4 2026 compared to the previous year, with strong demand capture contributing to this [29][65] Question: Are we starting to see more material AI capabilities that could impact demand decisions? - Management confirmed that AI capabilities are being embedded into core products, which is expected to drive future economic benefits as these solutions scale [36][35] Question: Can you provide insight into the growth mix from expansion versus competitive displacement? - Management noted that the majority of growth is still from expansion, but competitive displacements are also increasing, particularly as customers seek to consolidate their systems [42][44] Question: What is the outlook for SaaS demand and customer spending? - Management reported strong momentum for SaaS products, with customers increasingly opting for cloud solutions, leading to higher spending [54][53] Question: How is the company addressing churn in ServiceMax? - Management acknowledged residual churn but highlighted strong demand capture and cross-sell opportunities as positive indicators for ServiceMax's future [81][82] Question: What are the trends observed in the macro environment? - Management noted that despite a challenging macro climate, demand capture remains strong across various regions and verticals, with customers prioritizing modernization [93][95]

Financial Data and Key Metrics Changes - The company reported a constant currency ARR of $2.341 billion, up 9% year-over-year excluding Kepware and ThingWorx, and $2.5 billion, up 8.4% including them [17] - Free cash flow grew 13% year-over-year, reaching $267 million in Q1 2026 [17] - The company repurchased $200 million of common stock in Q1 under a $2 billion share repurchase authorization [18] Business Line Data and Key Metrics Changes - The company experienced record deferred ARR under contract, with a significant increase in large deal volume and competitive displacements [13][14] - The transformation strategy is showing results with higher seller productivity and improved quota attainment [12] Market Data and Key Metrics Changes - The company is seeing strong demand across various verticals and geographies, with no significant depressed markets [95] - The demand capture is strong, with a notable increase in deferred ARR expected to impact future quarters positively [21][22] Company Strategy and Development Direction - The company is focused on the Intelligent Product Lifecycle, emphasizing the integration of AI into existing systems to enhance product data utilization [8][10] - The strategy includes expanding customer engagements from single lifecycle stages to a holistic approach centered on product data and AI [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the transformation progress and the demand being captured, indicating a strong outlook for future growth [15][24] - The company is confident in its ability to deliver durable, multi-year growth driven by strategic customer commitments [14][25] Other Important Information - The company is targeting to close the divestiture of Kepware and ThingWorx on or before April 1, with expected net after-tax proceeds of approximately $365 million [18][23] - The guidance for fiscal 2026 includes expected growth of approximately 7.5%-9.5% for constant currency ARR, excluding Kepware and ThingWorx [19] Q&A Session Summary Question: What level of visibility do you have on ARR contribution from deferred ARR deals in Q4? - Management indicated that the deferred ARR is triple what was present last Q4, with strong demand capture contributing to this increase [28][65] Question: Are we starting to see more material AI capabilities that could impact demand decisions? - Management confirmed that AI capabilities are being embedded into core products, with positive customer feedback expected to drive future demand [35][36] Question: Can you provide insight into the growth mix from expansion versus competitive displacement? - Management noted that the majority of growth is from expansion, but competitive displacement is also increasing as customers consolidate their systems [42][44] Question: What is the outlook for SaaS demand and customer spending? - Management reported strong momentum for SaaS products, with customers increasingly opting for cloud solutions, leading to higher spending [54][55] Question: How is the company addressing churn in ServiceMax? - Management acknowledged past churn but highlighted recent strong demand capture and integration of ServiceMax into the Intelligent Product Lifecycle as positive developments [81][82]

Q1'26 FINANCIAL RESULTS Neil Barua CEO Jennifer DiRico CFO February 4, 2026 FORWARD LOOKING STATEMENTS This presentation includes forward looking statements regarding PTC's future financial performance, strategic outlook and expectations, anticipated future operations, expected effects of strategic investments and initiatives, and share repurchase expectations. Because such statements deal with future events, actual results may differ materially from those projected in the forward-looking statements. Inform ...

Core Insights - PTC Inc. is collaborating with Automobili Lamborghini to modernize product development through its Intelligent Product Lifecycle solutions, emphasizing digital innovation for future challenges [1][10] Group 1: Collaboration and Tools - Lamborghini is adopting PTC's Windchill PLM and Codebeamer ALM solutions to enhance product data traceability, streamline engineering change management, and improve team collaboration [2] - PTC's Creo CAD software is utilized by Lamborghini for designing complex engines, which helps accelerate development cycles while maintaining high standards of craftsmanship and performance [3] Group 2: AI Integration and Demonstration - PTC plans to showcase its Intelligent Product Lifecycle at CES 2026, featuring AI-enhanced tools like Codebeamer AI, Windchill AI, and ServiceMax AI to demonstrate the full lifecycle of product development [4][10] Group 3: Strategic Focus and Financial Outlook - PTC is divesting Kepware and ThingWorx to concentrate on an AI-driven Intelligent Product Lifecycle, with positive feedback and early operational gains already noted [7] - The company targets 7%-9% ARR growth for fiscal 2026 and aims for $1 billion in free cash flow, supported by strong deferred ARR and a stock buyback program of $150-$250 million per quarter [8]

Core Insights - PTC Inc. has launched the Arena PLM and QMS AI Engine, which integrates AI into product lifecycle and quality workflows to enhance efficiency and compliance [1][9] - The AI Engine features AI File Summary and AI File Comparison, which improve communication and reduce manual checks, thereby increasing productivity and compliance [2][9] - PTC's strategy focuses on embedding AI into PLM and QMS processes, enhancing product development ecosystems amid volatile global supply chains [3][4] Product and Technology Developments - The Arena AI Assistant has been expanded to include broader Help coverage and multilingual support, improving onboarding and productivity [4] - Arena Supply Chain Intelligence (SCI) has been upgraded with weekly compliance checks for electronic components, enhancing real-time monitoring and regulatory insights [4] Financial Performance - PTC's fiscal fourth quarter saw PLM revenue increase by 44% to $588 million and CAD revenue grow by 40% to $306 million, driven by strong demand and digitalization [5] - The divestiture of Kepware and ThingWorx is aimed at sharpening focus on core strengths in CAD, PLM, ALM, and SLM, which is expected to enhance product cohesion and innovation [6] Market Challenges - PTC faces challenges from foreign exchange volatility due to a stronger U.S. dollar, which may impact revenue performance [7] - The company has indicated that rising interest rates, shifting tax regulations, and a weakening macro environment could affect free cash flow and overall outlook [7] Stock Performance - PTC currently holds a Zacks Rank 3 (Hold), with shares gaining 2.7% over the past six months, contrasting with a 0.8% decline in the Zacks Computer-Software industry [8]

Company Overview - PTC Inc. is a software company based in Boston, Massachusetts, with a market capitalization of $20.8 billion, providing advanced digital solutions including Creo for 3D CAD design and Windchill for product lifecycle management [1][2] - The company is classified as a large-cap stock, supporting digital transformation across various industries such as automotive, aerospace, electronics, and industrial equipment [2] Financial Performance - PTC reported a 42.7% year-over-year increase in total revenue, reaching $893.8 million, which exceeded consensus estimates by 20.2% [5] - The adjusted EPS for Q4 was $3.47, reflecting a 125.3% increase from the previous year and surpassing analyst expectations by 53.5% [5] Stock Performance - PTC's shares have declined 21.2% from their 52-week high of $219.69, reached on July 31, and have fallen 15.1% over the past three months, underperforming the Nasdaq Composite's 7.8% rise [3][4] - Year-to-date, PTC shares are down 5.8%, compared to the Nasdaq's 22.1% return, and have decreased 13.2% over the past 52 weeks, lagging behind the Nasdaq's 19.5% increase [4] Market Trends - PTC has been trading below its 200-day moving average since early November and below its 50-day moving average since mid-September, indicating a bearish trend [4] - Following the Q4 earnings report, PTC's shares fell 8.4% due to weaker-than-expected guidance for Q1 2026, with projected revenue between $600 million and $660 million [5]