PTC Q1 Earnings Call Highlights

Key Points

• Solid Q1 financials: Constant-currency ARR grew ~9% year-over-year excluding Kepware and ThingWorx (8.4% including them), free cash flow was $267 million (up 13% YoY), and management raised fiscal‑2026 revenue and non‑GAAP EPS guidance while planning roughly $1.1–$1.3 billion of buybacks after the divestiture.
• “Turning the corner” with deferred ARR momentum: PTC reported record deferred ARR, higher seller productivity and large deal wins/competitive displacements, but said much of the deferred ARR will convert to ARR in fiscal 2027–2028, explaining near‑term ARR timing pressure.
• Product and AI strategy accelerating: PTC is integrating its portfolio (Creo, Windchill, Codebeamer, ServiceMax, Onshape) and launched Codebeamer AI and Windchill AI Parts Rationalization while building a common AI infrastructure to embed AI into trusted systems of record.

PTC NASDAQ: PTC executives said the company delivered a “solid” start to fiscal 2026, pointing to steady annual recurring revenue (ARR) growth, expanding free cash flow, and what they described as improving demand capture tied to its “Intelligent Product Lifecycle” strategy.

On the company’s fiscal first-quarter earnings call, CEO Neil Barua said PTC grew constant-currency ARR 9% year-over-year excluding Kepware and ThingWorx, and 8.4% including those businesses. CFO Jen DiRico, appearing on her first earnings call with PTC, said operating cash flow and free cash flow each increased 13% from a year earlier. Free cash flow was $267 million and included $10 million of divestiture-related costs tied to Kepware and ThingWorx.

Management also reiterated that the divestiture of Kepware and ThingWorx is progressing and remains on track to close on or before April 1, with no material changes to figures previously provided.

PTC frames progress as a transformation “turning the corner”

Barua said PTC is in a “turning the corner” phase of a broader transformation, citing what he characterized as momentum across product, go-to-market, and customer engagement. He highlighted five indicators:

• Accelerating product roadmap releases
• Record deferred ARR under contract
• Higher seller productivity
• Customer commitments that are strategic and increasingly span the full lifecycle
• Customer feedback that PTC’s Intelligent Product Lifecycle vision resonates

Barua argued that product development is becoming more complex, software-driven, and regulated, while development cycles are compressing and supply chains fragmenting. He said the company’s Intelligent Product Lifecycle framework centers on connected systems of record, enterprise-wide cloud access to product data, and AI embedded into workflows. PTC positioned its CAD, PLM, ALM, and SLM offerings as systems of record spanning the lifecycle, supported by an open ecosystem for exchanging data with other enterprise systems.

Product updates and AI releases emphasized

Executives highlighted recent product releases and integration work across the portfolio. Barua pointed to “gold standard” connectivity between Creo and Windchill, and said PTC is making progress connecting Windchill with Codebeamer, ServiceMax, and Onshape. He noted the December release of Codebeamer 3.2 to deepen the Windchill connection, and an October Windchill release that included a new user interface and new change management capabilities intended to simplify supplier data sharing.

On AI, Barua said customers are increasingly looking for AI embedded into trusted systems of record rather than standalone tools. During the quarter, PTC introduced Codebeamer AI in December, aimed at requirements quality, test case development, and compliance support, and released Windchill AI Parts Rationalization in January to help identify duplicate parts and improve part data consistency and search.

Barua said PTC is also building a common AI infrastructure across the portfolio to support consistent use of product data across CAD, PLM, ALM, and SLM, including third-party systems, with governance and security standards. In Q&A, he said AI’s direct financial impact is “immaterial” today, but management expects it to become a more meaningful economic driver as deployments move from proofs of concept to scaled adoption over the next few years.

Go-to-market execution and deferred ARR a recurring theme

Management repeatedly pointed to deferred ARR as evidence of demand capture that is not yet reflected in near-term ARR growth. Barua said PTC increased seller capacity, improved quota attainment, and saw ramping representatives more than double productivity year-over-year, attributing this to territory rebalancing, enablement improvements, and greater vertical focus.

He said the company posted a record-setting first quarter for large deal volume, competitive displacements, and deferred ARR. Barua said some of those contracts will begin converting to ARR in the fourth quarter of fiscal 2026, with most ramping in fiscal 2027 and fiscal 2028.

In response to analyst questions, Barua quantified the shift in deferred ARR entering Q4, saying the deferred ARR expected to start in Q4 of fiscal 2026 is “about triple” what PTC had entering Q4 of the prior year, and that deferred ARR building for 2027 is “double” what the company had coming into fiscal 2026. DiRico also confirmed that deferred ARR increased further in Q1 versus the level exiting Q4.

Executives said the deferred ARR dynamic is largely tied to strategic, cross-product deals and, in many cases, competitive displacements, with the timing driven by customer implementation cycles. Barua emphasized that the issue is timing rather than demand levels, including when discussing the company’s Q2 ARR outlook.

One example highlighted was an expansion with Garrett Motion. Barua said Garrett is modernizing its environment on a cloud-first, AI-ready architecture, selected Windchill+ for PLM and Codebeamer+ for ALM, and displaced competitors in both categories. He said the customer’s goal is to unify product development, broaden access to product data beyond engineering, and establish an AI foundation.

Capital return plans and updated guidance

DiRico said PTC repurchased $200 million of common stock in Q1 under its $2 billion authorization and plans to repurchase about $250 million in Q2. She said the company expects fully diluted share count to decline to about 119 million shares, compared with 121 million shares a year ago. For Q3 and Q4, PTC intends to repurchase $150 million to $250 million per quarter.

After the close of the Kepware and ThingWorx divestiture, DiRico said PTC intends to return additional capital to shareholders, citing expected net after-tax proceeds of about $365 million. She said this would bring expected fiscal 2026 buybacks to approximately $1.1 billion to $1.3 billion.

On guidance, PTC maintained its fiscal 2026 constant-currency ARR growth outlook excluding Kepware and ThingWorx of about 7.5% to 9.5%, and including those assets of about 7% to 9%. For Q2, the company expects constant-currency ARR growth of about 8% to 8.5% excluding Kepware and ThingWorx, and about 7.5% to 8% including them.

Free cash flow guidance for Q2 was $310 million to $315 million, including Kepware and ThingWorx for the full quarter and about $5 million of divestiture costs. DiRico said PTC’s business “as currently constituted” remains on track to deliver about $1 billion in free cash flow in fiscal 2026. She added the company still expects about $160 million of total cash outflows related to the transaction this year that are not expected to recur, and said PTC will update guidance after the transaction closes.

PTC raised its fiscal 2026 revenue guidance to $2.675 billion to $2.940 billion and increased non-GAAP EPS guidance to $6.69 to $9.15, which DiRico said aligned with Q1 results coming in above the high end of the prior guidance range. She said revenue growth outpaced ARR growth for a second consecutive quarter due to the strength, duration, and structure of customer commitments, and emphasized it was not a change in revenue recognition practices.

About PTC NASDAQ: PTC

PTC Inc NASDAQ: PTC is a global technology company that develops software and services to help manufacturers design, operate, and service physical products. Founded in 1985 as Parametric Technology Corporation, PTC pioneered parametric, feature-based CAD with its Pro/ENGINEER product (now marketed as Creo) and has since expanded its portfolio to address product lifecycle management, Internet of Things (IoT), augmented reality (AR) and industrial connectivity.

Key product lines include Creo for 3D CAD; Windchill for product lifecycle management (PLM); ThingWorx, an IoT platform for connecting devices and building industrial applications; Vuforia, an AR platform for creating immersive service and training experiences; and Kepware, a suite for industrial connectivity and protocol translation.

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