PTC INC. (PTC) Q4 2024 Earnings Summary

Executive Summary

Q4 FY24 delivered solid ARR and cash flow: revenue $626.55M, up 15% YoY constant currency; GAAP EPS $1.04 (includes $0.08 non-cash tax charge) and non-GAAP EPS $1.54 (includes $0.04 non-cash tax charge). Free cash flow was $93.58M, above ~$83M guidance; ARR ended at $2.255B as reported and $2.207B constant currency (+12% CC YoY) .
Management announced a $2B share repurchase authorization through FY27 and intends to repurchase ~$300M in FY25; plans to retire $500M senior notes due in Q2’25, continuing deleveraging (Q4 cash $266M; gross debt $1.753B) .
FY25 guidance set: constant currency ARR growth 9–10%, free cash flow $835–$850M, revenue $2.505–$2.605B, GAAP EPS $3.68–$4.57, non-GAAP EPS $5.60–$6.30; Q1’25 FCF ~$230M and ARR growth ~10.5% CC .
Strategic catalyst: go-to-market realignment to industry verticals and hiring a new CRO aimed at improving cross-sell (Windchill + Codebeamer + ServiceMax) and sustaining low double-digit ARR over the medium term; near-term guidance prudently allows for some friction from the transition .

What Went Well and What Went Wrong

What Went Well
- ARR and cash generation: “constant currency ARR…$2.207 billion, up 12% year‑over‑year. Deferred ARR came in as expected…free cash flow…$736 million, up 25% (FY)” .
- Margin expansion: Q4 GAAP operating margin 31.0% (+880 bps YoY) and non‑GAAP operating margin 44.1% (+740 bps YoY) as revenue mix and cost discipline drove leverage .
- Strategic clarity and capital returns: $2B buyback authorization and intent to repurchase ~$300M in FY25; guiding to return ~50% of FCF long-term when leverage <3x. “This provides us with another lever to further enhance shareholder value” (CEO) .
What Went Wrong
- Selling environment remained challenging; Western Europe softness (auto in Germany) caused some deals to slip or downsize in Q4; mgmt remains “cautious…how they’re going to spend,” despite urgency to transform .
- FY25 ARR growth guide at 9–10% (midpoint below prior “low double-digit” commentary), reflecting prudent allowance for potential near‑term go‑to‑market disruption .
- Q4 GAAP EPS included a $9.8M ($0.08) non‑cash tax charge; non‑GAAP EPS included a $5.3M ($0.04) non‑cash tax charge tied to IRS procedural guidance (dampening EPS optics) .

Financial Results

Headline metrics vs prior year and prior quarter (all $USD unless noted)

Metric	Q4 2023	Q3 2024	Q4 2024
Revenue ($ Millions)	$546.62	$518.64	$626.55
GAAP EPS ($)	$0.38	$0.57	$1.04
Non-GAAP EPS ($)	$1.20	$0.98	$1.54
GAAP Operating Margin (%)	22.2%	18.5%	31.0%
Non-GAAP Operating Margin (%)	36.7%	31.7%	44.1%
Operating Cash Flow ($ Millions)	$49.77	$213.80	$98.11
Free Cash Flow ($ Millions)	$43.99	$212.16	$93.58
ARR – As Reported ($ Millions)	$1,979	$2,126	$2,255
ARR – Constant Currency ($ Millions)	$1,979	$2,125	$2,207

Revenue breakdown (in thousands)

Revenue Detail ($ Thousands)	Q4 2023	Q3 2024	Q4 2024
License	$184,391	$149,104	$239,448
Support & Cloud Services	$324,088	$339,505	$352,935
Professional Services	$38,141	$30,030	$34,164
Total Revenue	$546,620	$518,639	$626,547

KPI and balance sheet snapshot

KPI / Balance ($ Millions)	Q4 2023	Q3 2024	Q4 2024
Cash & Cash Equivalents	$288	$248	$266
Gross Debt	$2,322	$1,816	$1,753

Notes:

Q4’24 GAAP EPS includes a $9.8M ($0.08) non‑cash tax charge; non‑GAAP EPS includes a $5.3M ($0.04) non‑cash tax charge .
Q4’24 revenue grew 15% YoY constant currency; FY’24 revenue grew 9% CC .
Q4 FCF ($93.58M) exceeded Q4 guidance (~$83M) .

Guidance versus company guidance ranges (Q4 actuals inside ranges)

Q4’24 Revenue $626.55M vs guidance $598–$648M; Non‑GAAP EPS $1.54 vs $1.30–$1.66; FCF $93.58M vs ~$83M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Constant Currency ARR Growth	FY25	“Low double-digit” commentary (Q3 framework)	9%–10%	Formal range set below prior qualitative commentary
Free Cash Flow ($M)	FY25	$825–$875 (framework)	$835–$850	Narrowed/formalized
Revenue ($M)	FY25	N/A	$2,505–$2,605	New item
GAAP EPS ($)	FY25	N/A	$3.68–$4.57	New item
Non‑GAAP EPS ($)	FY25	N/A	$5.60–$6.30	New item
Constant Currency ARR Growth	Q1’25	N/A	~10.5%	New item
Free Cash Flow ($M)	Q1’25	N/A	~ $230 (includes ~$12M GTM realignment outflow)	New item
Cash Interest ($M)	FY25	N/A	~ $90	New item
Cash Taxes ($M)	FY25	N/A	~ $110	New item
Capex ($M)	FY25	N/A	~ $15	New item
GAAP & non‑GAAP Tax Rate	FY25	~20% FY24 baseline	~25%	Higher
Share Repurchase	FY25	Expect to resume ~$300M (framework)	Intend ~$300M in FY25; $2B authorization thru FY27	Formalized + authorization
Debt	FY25	N/A	Intend to retire $500M notes due Q2’25	New item

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2’24 and Q3’24)	Current Period (Q4’24)	Trend
Go‑to‑market realignment	Q2: “turning over stones,” reallocating R&D to core; early focus on GTM/G&A . Q3: flattened layers; COO role removed; early innings of GTM optimization .	Formal vertical realignment (industrial, FA&D, electronics/high‑tech, auto, med‑tech/life sciences); hiring new CRO; ~$20M cash outflows; guidance allows for potential friction .	Acceleration; execution in FY25 with controlled near‑term risk
Macro/selling environment	Sluggish for multiple quarters; close rates challenged; pipeline healthy .	Still challenging; Western Europe (auto/Germany) deal push/smaller sizes; cautious on spend pace .	Persistent headwind; region‑specific pressure
Product performance (PLM/CAD/ALM/SLM)	PLM/Windchill expansion; Codebeamer strong (traceability/agile); ServiceMax cross‑sell into base; CAD double‑digit growth . Q3 reiterated 10% CAD and 13% PLM ARR growth CC .	Continued focus on Windchill + Codebeamer + ServiceMax integrations; highlighted auto OEM Codebeamer expansions and ServiceMax‑Windchill case .	Strength in PLM/ALM/SLM; integration‑led cross‑sell
Capital allocation	FY24 debt paydown priority; expect to resume ~$300M buybacks in FY25 .	$2B buyback authorization; ~$300M FY25 repurchases planned; retire $500M notes in Q2’25 .	Shareholder returns re‑engaged
ARR/FCF discipline	ARR +12% CC; FCF growth outpacing ARR; OpEx ~½ of ARR growth over time . Q3 FCF timing issue resolved; reiterated FY24 FCF .	FY25 guide: ARR +9–10% CC; FCF $835–$850M with GTM outflows absorbed; reiterates budgeting discipline and leverage model .	Continued focus; strong FCF visibility
Regional trends	Stable across regions in Q2/Q3; low‑mid double‑digit CC ARR growth across Americas/Europe/APAC .	Western Europe auto noted as weak; APAC and reseller channel cited as relative strengths .	Mixed: Europe weaker; APAC/channel better
SaaS/Plus strategy	Decade‑long journey; ongoing Plus releases; methodical migrations .	Reaffirmed SaaS focus; GTM verticalization to support scale .	Steady, long‑duration transition

Management Commentary

CEO Neil Barua on strategy and GTM: “We are making changes to our go‑to‑market structure that I believe will make us more effective in serving our customers…realigning…around the 5 key verticals…We are hiring a new Chief Revenue Officer…to drive increased focus, speed and accountability” .
CEO on market tone: “There were varying pockets of relative strength…APAC and…reseller channel…pockets of relative weakness such as Western Europe…aggregate transaction volumes were in line with what we have been seeing over the past couple of years” .
CFO Kristian Talvitie on FY24 performance: “At the end of Q4, our constant currency ARR…was $2.207 billion, up 12% year‑over‑year…For the full year, our free cash flow was $736 million, up 25%” .
CFO on FY25 guidance & cash flow model: “We’re guiding for free cash flow of $835 million to $850 million in fiscal ’25, which absorbs the approximately $20 million of outflows for severance and consulting fees related to our go‑to‑market realignment…we have a high degree of confidence in our guidance for free cash flow due to the predictability of our cash collections” .
CEO on Western Europe auto: “We had a few deals in Western Europe…that either pushed out or got smaller…[auto] under immense pressure to transform to software‑defined vehicles…our technology underpins that change” .

Q&A Highlights

GTM transition and guidance prudence: Management emphasized actions to minimize disruption but set guidance with room in case of short‑term friction; FY25 ARR midpoint below prior commentary reflects conservatism .
Vertical demand commentary: Strength in federal/aerospace & defense; med‑tech/life sciences seeing PLM urgency; auto (especially Germany) pressured but a catalyst for Codebeamer + Windchill adoption .
ARR mechanics and Q1 outlook: Q1 sequential ARR impacted (~$10M) by deferred ARR linearity and contracts that churn then re‑enter later in FY25; not expected to affect full‑year .
Capital returns and leverage: Plan to buy back ~$300M in FY25; retire $500M notes due Q2’25; maintain low cash balance while returning excess to shareholders .
Revenue/EPS under ASC‑606: Continued reminder that ARR and FCF are the best performance metrics given variability in revenue recognition .

Estimates Context

Wall Street consensus (S&P Global) could not be retrieved at this time due to an API limit; therefore, we cannot quantify beat/miss versus S&P consensus for Q4 FY24. The company’s Q4 results landed within its own guidance ranges for revenue and non‑GAAP EPS, and FCF exceeded guidance .

Key Takeaways for Investors

Mix and model quality: Strong ARR (+12% CC YoY) and FCF underpin resilience; non‑GAAP operating margin at 44.1% highlights operating leverage .
Strategic execution: Verticalized GTM with a new CRO should enhance cross‑sell (Windchill + Codebeamer + ServiceMax) and pipeline conversion; near‑term ARR guide prudently allows for transition friction .
Capital returns as catalyst: $2B authorization and planned ~$300M FY25 buybacks plus $500M bond retirement support per‑share value creation and lower interest burden .
Regional watch‑item: Western Europe auto remains a soft spot; management sees secular urgency that could translate to medium‑term PLM/ALM expansions .
FY25 setup: ARR growth guide 9–10% and FCF $835–$850M (after ~~$20M GTM outflows) reflect confidence in cash predictability; cash taxes higher (~~$110M) and interest lower (~$90M) YoY .
Trading implications: Near‑term narrative centers on execution of GTM realignment and ARR trajectory; medium‑term thesis rests on digital thread leadership, integration synergies, and consistent FCF return policy .

Appendix: Additional Data Points and Disclosures

Q4’24 revenue grew 15% YoY constant currency; FY’24 revenue grew 9% CC .
Q4’24 non‑GAAP EPS includes $0.04 non‑cash tax charge; GAAP EPS includes $0.08 non‑cash charge linked to IRS procedural guidance .
FY25 assumptions: GAAP/non‑GAAP tax rate ~25%; OpEx up ~4% GAAP/~5% non‑GAAP at ARR guide; capex ~$15M; plan to keep fully diluted shares ~flat in FY25 .