PTC INC. Q1 FY2025 earnings call

• PTC started fiscal 2025 as anticipated with first quarter results slightly better than guidance. They reiterated ARR and free cash flow guidance ranges for fiscal 2025.
• They made progress on the go-to-market organization verticalization, with Rob Dahdah joining as Chief Revenue Officer and adding key leadership roles in growth marketing, enablement, sales, and customer success.
• Focused on five core product areas: PLM (Windchill), ALM (Codebeamer), SLM (ServiceMax), CAD (Creo), and SaaS. Made advancements such as Windchill extending 3D digital work instructions, Codebeamer 3.0 upcoming, ServiceMax achieving FedRAMP certification, Creo-12 advancements, and Onshape's releases.
• Worked on AI applications across products, with ServiceMax AI launching next week and Codebeamer testing beta generative AI features. Highlighted customer examples like a medtech customer using Windchill and adopting Codebeamer, and a federal aerospace and defense customer using Creo and Windchill.

At the end of Q1 2025, PTC's constant currency ARR using fiscal 2025 plan FX rates was $2.277 billion, up 11% year-over-year. In terms of product groups, constant currency ARR year-over-year growth was 9% in CAD (primarily driven by Creo) and 11% in PLM (primarily driven by Windchill, Codebeamer, IoT, and ServiceMax). On a regional basis, constant currency ARR grew by 9% in the Americas and 12% in both Europe and Asia Pacific.

• Reiterated ARR and free cash flow guidance ranges for fiscal 2025. Expected constant currency ARR growth of approximately 9% to 10% for fiscal 2025 and approximately 9.5% for Q2 of fiscal 2025.
• Free cash flow guidance for fiscal 2025 is $835 million to $850 million, with Q2 free cash flow guidance approximately $270 million.

• Possible sluggish selling environment.
• Uncertainty around the impact of go-to-market transformations.
• Potential negative effects from FX fluctuations and interest rate changes.

Q: Jay Vleeschhouwer asked about how PTC is organizing and investing in AI and expansion into manufacturing process.

A: Neil Barua responded that AI investments are being aligned across product segments, with ServiceMax AI launching and Codebeamer working on beta features, and on manufacturing process, PTC focuses on extending PLM data to manufacturing floor.

Q: Jason Celino asked about PTC's position in PLM competitive environment.

A: Neil Barua said PTC is fully in the arena, focused on Windchill and Codebeamer capabilities differentiated from competitors.

Q: Ken Wong asked about NRR trajectory.

A: Kristian Talvitie reiterated that Q1 was pretty close to internal targets.

Q: Siti Panigrahi asked about go-to-market alignment progress and macro metrics.

A: Neil Barua detailed go-to-market changes like verticalization, new CRO Rob's impact, and mentioned focusing on pipeline and macro metrics like PMI.

Q: Peter asked about expansion of PLM customer base.

A: Neil Barua said there's opportunity to expand PLM to more seats across enterprises.

Q: Stephen Tusa asked about AI impact on budgets.

A: Neil Barua said customers need to get digital house in order before applying AI, and PTC's offerings help with that.

Q: Arsenije Matovic asked about ARR performance and growth recovery.

A: Neil Barua said Q1 was as expected, focusing on go-to-market machinery and product releases for growth recovery.

Q: Nay Soe Naing asked about go-to-market change progress and AI product launches.

A: Neil Barua said go-to-market transformation had good progress, and AI launches will be across portfolio.

Q: Saket Kalia asked about growth of segments and drag from other businesses.

A: Neil Barua said PLM has strong growth potential, and they're using other technologies to augment core growth rates.