PTC INC. Q1 FY2026 earnings call

• Transformation progress: Grew constant currency ARR 9% excluding Kepware and ThingWorx and 8.4% including them, and free cash flow 13% year over year. Divestiture of Kepware and ThingWorx on track to close by April 1.
• Intelligent product life cycle: Based on connected systems of record, enterprise-wide cloud access, and AI embedded in workflows. Accelerating product roadmap releases, record deferred ARR, higher seller productivity, strategic customer commitments spanning full life cycle.
• Product integrations: Deepening connections between Windchill and CodeBeamer, ServiceMax, Onshape. AI initiatives: Embedding AI across portfolio for high-value use cases, e.g., CodeBeamer AI for requirements quality, Windchill AI parts rationalization.
• Go-to-market execution: Increased seller capacity, improved quota attainment, ramping reps more than double productivity year over year. Expanding scope of customer and partner engagements to holistic intelligent product life cycle centered on product data and AI.

Constant currency ARR excluding Kepware and ThingWorx was $2.341 billion, up 9% year over year. Including Kepware and ThingWorx, constant currency ARR was $2.5 billion, up 8.4% year over year. Free cash flow grew 13% year over year. Revenue contribution details weren't explicitly broken down by specific product segments other than the mention of ARR growth across the portfolio.

• Fiscal 2026 constant currency ARR excluding Kepware and ThingWorx: 7.5% to 9.5% growth; including them: 7% to 9% growth. Q2 2026 constant currency ARR excluding Kepware and ThingWorx: 8% to 8.5% growth; including them: 7.5% to 8% growth.
• Q2 2026 free cash flow guidance: $310 million to $315 million, including Kepware and ThingWorx for the full quarter. Fiscal 2026 free cash flow expected to be approximately $1 billion. Share repurchases: Repurchased $200 million in Q1, intends to repurchase ~$250 million in Q2, $150 million to $250 million in Q3 and Q4, and additional capital return post-Kepware/ThingWorx divestiture.
• Raised fiscal 2026 revenue guidance to $2.675 billion to $2.94 billion and non-GAAP EPS guidance to $6.69 to $9.15.

Q: Yun Kim from Loop Capital Market asked about Q4 ARR visibility from deferred ARR deals, variables behind ramp, and timing impact on cash flow.

A: Neil Barua said demand capture progress led to triple deferred ARR in Q4 2026 vs last Q4, double deferred ARR starting 2027 vs prior year, driven by strategic deals and competitive displacements. Jen DeRico added on technicalities.

Q: Joseph D. Vruwink with Baird asked about AI releases in products and their impact.

A: Neil Barua said AI releases are embedded in mission-critical systems to advise and assist workflows, with progress in CodeBeamer AI and Windchill AI parts rationalization, expecting economic impact as deployments scale.

Q: Adam Charles Borg with Stifel asked about Creo and Windchill growth mix and competitive displacement.

A: Neil Barua said Windchill growth includes expansion and competitive displacements, Creo is a steady grower, with Onshape also driving competitive takeaways. Robert Dahdah added on majority growth from expansion but increasing competitive displacement.

Q: Matthew Hedberg with RBC Capital Markets asked about SaaS portfolio demand and pricing.

A: Neil Barua said strong momentum in SaaS portfolios like Onshape Arena, ServiceMax, with Windchill Plus and Creo Plus seeing increasing demand, expecting SaaS to be a growth driver with similar pricing lift as observed.

Q: Joshua Tilton with Wolfe Research asked about channel vs direct business in ARR.

A: Jen DeRico and Robert Dahdah said good momentum in both, with large deals influencing mix, and focus on customer preference and partnership.

Q: Blair Harold Abernethy with Rosenblatt Securities asked about new customer interest and defense program.

A: Robert Dahdah said new customers default to cloud, seeing good traction, and positive reception in defense with opportunity to serve lower end of market.

Q: Ken Wong with Oppenheimer asked about Q2 ARR guide seasonality.

A: Jen DeRico said shape of growth curve similar to prior guidance, with step up in Q3 and larger step up in Q4.

Q: Daniel Jester with BMO Capital Markets asked about ServiceMax update.

A: Neil Barua said working through churn, seeing cross-sell demand capture, and integrating ServiceMax into intelligent product life cycle. Robert Dahdah added on go-to-market alignment.

Q: Jason Vincent Celino with KeyBanc Capital Markets asked about Q2 net new ARR.

A: Neil Barua said related to deal structuring and assumption of deferred ARR impact, with focus on durable growth.

Q: Sitikantha Panigrahi with Mizuho asked about macro trends and vertical strength.

A: Neil Barua and Robert Dahdah said strong performance across geographies and verticals, with no single depressed area, and urgency for customers to modernize.

Q: Nay Soe Naing with Berenberg asked about deferred ARR implementation timeline control.

A: Robert Dahdah said deferred ARR is contractual, with customer incentive to be on time, and tight linkage between sales and customer success for proper implementation.

Q: Tyler Maverick Radke with Citi asked about deferred ARR impact on guidance and durability.

A: Neil Barua said go-to-market transformation and demand capture progress lead to durable growth, with inflection in Q4 2026 and beyond.

Q: Jay Vleeschhouwer with Griffin Securities asked about deal profile and auto momentum.

A: Neil Barua and Robert Dahdah said positive reception at CES, expanding auto momentum with CodeBeamer and AI, and construction of larger deals in pipeline.

Q: Joshua Tilton with Wolfe Research asked about confidence in deferred ARR coming through.

A: Neil Barua said tighter linkage between sales and customer success, and disciplined deal structuring reduce risk of deferred ARR not materializing.