Core Insights - PTC Inc. is enhancing its Application Lifecycle Management (ALM) portfolio to address rising software complexity and regulatory challenges with the launch of Codebeamer 3.2, Codebeamer AI 1.0, and Pure Variants 7.2, targeting highly regulated industries such as automotive and aerospace [1][9] Group 1: Product Enhancements - The new releases focus on three core priorities: stronger traceability, improved change management, and governed AI assistance aligned with regulatory standards [1] - Codebeamer 3.2 and Pure Variants 7.2 introduce Stream Baselines, allowing teams to capture complete snapshots of projects, facilitating faster identification of project states and simplifying impact analysis [3] - Pure Variants 7.2 includes Feature-Based PLE enhancements that automate stream and baseline creation, supporting concurrent development across platforms [4] Group 2: AI Integration - Codebeamer AI 1.0 introduces two AI assistants designed for regulated environments, improving requirements quality by identifying ambiguities and inconsistencies [5] - The Test Case Assistant in Codebeamer AI generates test cases directly from requirements, enhancing traceability and speeding up validation processes [6] Group 3: Strategic Moves - PTC's divestiture of Kepware and ThingWorx aims to sharpen its portfolio around core strengths in CAD, PLM, ALM, and SLM, simplifying its product strategy [8] - The company's go-to-market realignment is intended to enhance customer value and capture new opportunities in a competitive market [10] Group 4: Market Position - PTC has experienced a decline of 16.1% in stock price over the past six months, compared to a 13.1% decline in the Zacks Computer-Software industry [12]

Core Insights - PTC Inc. is set to report its third-quarter fiscal 2025 results on July 30, with anticipated revenues between $560 million and $600 million and non-GAAP EPS projected between $1.05 and $1.30 [1][8] - The Zacks Consensus Estimate for revenues stands at $582.4 million, reflecting a 12.3% increase year-over-year, while the earnings consensus is $1.22 per share, indicating a 24.5% rise from the previous year [1][2] Revenue and Earnings Performance - PTC has consistently exceeded the Zacks Consensus Estimate in the last four quarters, with an average earnings surprise of 15.4% [2] - Over the past year, PTC's shares have increased by 15.4%, compared to a 23% growth in the Zacks Computer – Software industry [2] Business Drivers - The core business segments, including product lifecycle management (PLM) and computer-aided design (CAD) solutions, are expected to be significant revenue contributors for the upcoming quarter [3] - Generative AI initiatives and enhancements to the product portfolio are anticipated to positively influence performance, with advancements across PLM, ALM, SLM, and CAD [4] Financial Expectations - For the fiscal third quarter, PTC expects cash from operations to be between $234 million and $239 million, and free cash flow to range from $230 million to $235 million, factoring in approximately $4 million in cash outflows related to restructuring efforts [5][8] - The company anticipates a sequential net annualized recurring revenues (ARR) growth of $30 million to $50 million for the fiscal third quarter [5] Market Challenges - PTC has narrowed its ARR outlook for fiscal 2025 to 7-9% from a previous estimate of 9-10%, citing global trade volatility and customer caution as contributing factors [6] - Adverse foreign currency exchange rates and intense competition in the CAD market are also expected to pose challenges [9] Recent Developments - PTC announced a partnership with Nimble to upgrade its design and operations systems to PTC's cloud-based solutions [10] - The introduction of the Arena Supply Chain Intelligence offering enhances PTC's PLM and QMS solutions with AI-driven component risk monitoring [11] - PTC launched model-based definition capabilities within its Onshape platform, marking a significant advancement in cloud-native CAD solutions [12] - The release of Creo 12, the latest version of PTC's CAD software, includes numerous enhancements aimed at improving design and collaboration [13]

Financial Data and Key Metrics Changes - PTC reported a 10% year-over-year growth in Annual Recurring Revenue (ARR) and a 13% increase in free cash flow for Q2 [4][5][13] - The constant currency ARR at the end of Q2 was $2,326 million, reflecting a 10% increase year-over-year [13] - Free cash flow for Q2 was $279 million, which absorbed $3 million related to go-to-market realignment [14][16] Business Line Data and Key Metrics Changes - ARR growth was 8% in CAD, primarily driven by CREO, and 11% in PLM, driven by Windchill, CodeBeamer, and IoT [15] - The Americas saw a 9% ARR growth, Europe 11%, and Asia Pacific 10% year-over-year [15] Market Data and Key Metrics Changes - PTC's gross debt was $1,393 million, with a leverage ratio of 1.5 times [16] - The company paid down $500 million of senior notes due in February and reduced gross debt by $155 million in Q2 [16] Company Strategy and Development Direction - PTC's strategy focuses on deepening customer value through PLM, ALM, SLM, CAD, and SaaS, while leading innovation through applied generative AI [29] - The company is actively pursuing a go-to-market transformation to enhance execution and customer engagement [6][29] Management's Comments on Operating Environment and Future Outlook - Management acknowledged growing uncertainty related to global trade dynamics and macro pressures, which may affect customer buying behavior [9][10] - Despite the uncertainty, the long-term need for digital transformation remains strong, and PTC is well-positioned to support customers in this transition [12][30] Other Important Information - PTC continues to execute share buybacks under a $2 billion repurchase authorization, with $75 million used to repurchase shares in Q2 [5][16] - The company introduced several AI initiatives across its product lines, including Windchill AI and ServiceMax AI [8][53] Q&A Session Summary Question: Can you elaborate on the downside scenario for the 7% ARR growth? - Management explained that the 7% scenario considers potential delays and smaller deal sizes due to macroeconomic conditions, with a bottoms-up and tops-down assessment conducted [33][36][38] Question: What indicators show that the go-to-market changes are working? - The team reported low churn and successful execution of the vertical approach, which has improved customer engagement and pipeline quality [40][43] Question: How should investors think about the $1 billion free cash flow target next year? - Management indicated that it is premature to provide specifics, as various macroeconomic factors will influence the target [46][49] Question: How are customer discussions regarding AI adoption progressing? - Management noted increased customer engagement with AI products, emphasizing the importance of a solid product data foundation for effective AI utilization [52][54] Question: Are the conversations with customers indicating widespread deal postponements? - Management clarified that conversations vary by customer and vertical, with some customers moving forward while others may delay decisions [76][78] Question: What assumptions are behind the new ARR guidance range? - The guidance reflects a cautious outlook due to recent macroeconomic uncertainties, with the potential for improvement if trade issues are resolved [80][81]

Financial Data and Key Metrics Changes - PTC reported a 10% year-over-year growth in Annual Recurring Revenue (ARR) and a 13% increase in free cash flow for Q2 2025 [5][15] - The constant currency ARR at the end of Q2 was $2,326 million, reflecting a 10% increase year-over-year [15] - Free cash flow for Q2 was $279 million, which absorbed $3 million related to go-to-market realignment [16][17] Business Line Data and Key Metrics Changes - ARR growth was 8% in CAD, primarily driven by CREO, and 11% in PLM, driven by Windchill, CodeBeamer, and IoT [16] - The Americas saw a 9% growth in constant currency ARR, Europe 11%, and Asia Pacific 10% [16] Market Data and Key Metrics Changes - PTC's gross debt was $1,393 million, with a leverage ratio of 1.5 times [17] - The company paid down $500 million of senior notes due in February and reduced gross debt by $155 million in Q2 [17] Company Strategy and Development Direction - PTC's strategy focuses on deepening customer value through PLM, ALM, SLM, CAD, and SaaS, while leading innovation through applied generative AI [30] - The company is actively pursuing a go-to-market transformation to enhance execution and customer engagement [8][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged growing uncertainty related to global trade dynamics and macro pressures, which could affect customer buying behavior [10][11] - Despite the uncertainty, the long-term need for digital transformation remains strong, and PTC is well-positioned to support customers through this transition [12][13] Other Important Information - PTC continues to execute share buybacks under a $2 billion repurchase authorization, with $75 million used to repurchase shares in Q2 [17][18] - The company has raised the low end of its free cash flow guidance for 2025 to $840 million, reflecting strong execution and profitability focus [19] Q&A Session Summary Question: Could you dive deeper into the downside scenario for the 7% ARR? - Management explained that the 7% scenario assumes significant macro deterioration, with potential delays or downsizing of projects based on customer conversations [34][39] Question: What steps have been taken in the go-to-market strategy? - Management expressed confidence in the go-to-market transformation, highlighting low churn and successful retention of top talent [42][44] Question: How should we think about the $1 billion free cash flow target next year? - Management indicated that it is premature to provide specifics, as they need to assess various factors including interest rates and foreign exchange rates [46][48] Question: How are customer discussions regarding AI adoption progressing? - Management reported increased customer engagement regarding AI capabilities, with a belief that generative AI will drive future growth [52][54] Question: Is the macro uncertainty affecting specific products or verticals? - Management clarified that the uncertainty is not product-specific but relates to how customers are making investment decisions amid macroeconomic conditions [90][91]

Core Insights - PTC Inc is showcasing its latest innovation, Windchill AI, at Hannover Messe 2025, enhancing its position in AI-powered product lifecycle management (PLM) [1] - The event highlights how agentic AI technologies are transforming the product digital thread across various stages of product development [2] Product Innovations - Windchill AI serves as an AI-powered assistant that utilizes extensive product data from PTC's Windchill PLM solution, improving access to information and decision-making efficiency [1] - A notable feature of Windchill AI is the Document Vault AI agent, which extracts essential product-related information from documents, aiding in quality assurance and comparative analysis [3] Strategic Partnerships - PTC is collaborating with Microsoft to demonstrate generative design capabilities within its Creo CAD software, focusing on AI-infused digital thread use cases [4] - In partnership with Dell and Accenture, PTC will showcase its Digital Performance Management solution to help manufacturers identify and eliminate production bottlenecks [5] - PTC's collaboration with Amazon Web Services aims to enhance its Onshape solution, focusing on improving features and increasing customer adoption [9] Market Position and Growth Potential - PTC's solutions are positioned to optimize product design, development, and maintenance, with strong business momentum expected to boost investor confidence [6] - The company is undergoing a strategic realignment to better align its go-to-market organization with key vertical industries, which is anticipated to drive long-term growth [7] - Despite facing forex headwinds and challenging sales conditions, PTC's revised sales forecast for 2025 is between $2,430 million and $2,530 million, down from a previous estimate of $2,505 million to $2,605 million [9]