PTC(PTC) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q1 2025, the company's constant currency ARR was $2.277 billion, reflecting an 11% year-over-year increase [42] - Free cash flow for Q1 was$ 236 million, up 29% year-over-year, despite absorbing $11 million related to go-to-market realignment [43][46] - The company ended Q1 with cash and cash equivalents of$ 196 million and gross debt of $1.548 billion, maintaining a leverage ratio of 1.7 times [45][46] Business Line Data and Key Metrics Changes - Constant currency ARR growth was 9% in CAD, driven primarily by Creo, and 11% in PLM, primarily driven by Windchill, Codebeamer, IoT, and ServiceMax [44] - The ARR growth was 9% in the Americas and 12% in both Europe and Asia Pacific [44] Market Data and Key Metrics Changes - The company continues to experience a challenging selling environment, impacting close rates, but remains optimistic about future growth [42][41] - The macroeconomic environment is showing signs of improvement, with manufacturing PMI bouncing back above 50, which could positively influence sales [90] Company Strategy and Development Direction - The company is focused on a go-to-market transformation, emphasizing vertical alignment to capture long-term growth opportunities [9][12] - Key leadership changes have been made, including the appointment of a new Chief Revenue Officer to enhance sales performance and alignment across teams [10][11] - The company is concentrating on five core areas: PLM, ALM, SLM, CAD, and SaaS, to drive customer value [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about exiting fiscal 2025 with increased momentum, driven by product releases and AI initiatives [7][39] - The company expects to achieve low-double-digit ARR growth over the medium term, supported by a resilient subscription model and low churn rates [12][41] Other Important Information - The company is investing in AI capabilities across its product portfolio, with upcoming launches in ServiceMax and Codebeamer [22][25] - The company plans to return approximately 50% of free cash flow to shareholders through share repurchases, with a target of$ 300 million in fiscal 2025 [48] Q&A Session Summary Question: Comments on AI product organization and investment - The company is evolving its AI development efforts, with a focus on practical applications and alignment across product segments [72] Question: Competitive environment in PLM - The company is actively competing in the PLM space, focusing on the integration of Windchill and Codebeamer to enhance product development cycles [80] Question: Trajectory of net new ARR - The company anticipates a back-half loaded year, with expectations for improved performance in Q4 as go-to-market changes take effect [86][90] Question: Progress on go-to-market alignment - The company is pleased with the progress made in Q1 regarding go-to-market changes and is optimistic about future execution [125] Question: AI product launches across the portfolio - The company plans to expand AI capabilities beyond just Codebeamer and ServiceMax, with more developments expected across the entire product line [130]