PTC at Oppenheimer Conference: Strategic AI and Financial Targets

On Wednesday, 13 August 2025, PTC Inc (NASDAQ:PTC) participated in the Oppenheimer 28th Annual Technology, Internet & Communications Conference. The company highlighted its strategic focus on AI integration and financial targets, amid a challenging macroeconomic environment. While PTC’s performance remains stable, the company is actively pursuing growth through strategic initiatives and product innovation.

Key Takeaways

• PTC is targeting $1 billion in free cash flow for fiscal year 2025.
• The company is focusing on AI development with new AI agents for various products.
• PTC’s net new ARR reached the high end of its guidance range.
• The company is not expecting significant macroeconomic improvements but remains focused on executing its current plans.
• PTC is prioritizing net debt management and shareholder returns through share repurchases.

Financial Results

• Net New ARR: PTC achieved net new ARR at the high end of its guidance for the recent quarter.
• Guidance Adjustment: The company raised the low end of its guidance range, reducing the likelihood of a downside scenario.
• Free Cash Flow Target: Aiming for $1 billion in free cash flow by fiscal year 2025, PTC is considering factors such as currency fluctuations and tax benefits.

Operational Updates

• Go-to-Market Strategy: PTC has shifted its focus to core verticals, aligning sales and marketing efforts. Account reshuffling and territory optimization have been implemented.
• Cultural Changes: New cultural initiatives under Rob’s leadership focus on pipeline management and hygiene.
• SI Relationships: The company is expanding relationships with system integrators to improve organizational change management for customers.

Future Outlook

• AI Integration: PTC is prioritizing AI, with ServiceMax AI already launched and other AI agents expected by year-end. Monetization strategies are under development.
• PLM Focus: The company views Product Lifecycle Management (PLM) as crucial for helping customers develop competitive products faster.
• Capital Allocation: PTC is committed to maintaining a net debt position, a low cash balance, and returning excess cash to shareholders.

Q&A Highlights

• Churn Management: Elevated churn was linked to specific events, with some contracts expected to return in Q4.
• SaaS Transition: Growing customer interest in SaaS is noted, with cloud adoption leading to significant uplift.
• Product Developments: New capabilities will be integrated into Creo and Windchill, facilitating a transition to SaaS.

For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - Oppenheimer 28th Annual Technology, Internet & Communications Conference:

Ken Wong, Software Analyst, Oppenheimer: Alright. Good morning, everybody. Welcome to day three of the Oppenheimer Virtual Tech Conference. I’m Ken Wong, software analyst here at Oppenheimer. Very happy to have with me Christian Talbatia, EVP and chief financial officer at PTC.

Christian, good morning. Welcome.

Christian Talbatia, EVP and CFO, PTC: Ken, thanks for having us. We appreciate it.

Ken Wong, Software Analyst, Oppenheimer: Yep. Always happy to engage. Look, I I think maybe to start off touching on the most recent quarter, like, I don’t wanna call it an inflection, but I think not only me, but a lot of your shareholders felt that that was probably the most positive you guys have sounded in quite some time. So maybe just compare and contrast for us, you know, the start of the year to where we are now and kinda how how that how that kinda positions you guys for for the close of the year.

Christian Talbatia, EVP and CFO, PTC: Yeah. Sure. Good good question, Ken. And just before I get started, I know my general counsel would be very angry at me if I did not point out direct folks to our safe harbor language and our risk factors that are available in our press releases and on file forms ten ten q and 10 k on file with the SEC. So I would definitely encourage everybody to review those.

Now back to your, you know, back to your original question. You know, the quarter certainly started off in a interesting way with, you know, with Liberation Day. And, you know, we were still in the, we’ll call it, maelstrom of uncertainty in the beginning of the quarter. And and by the time we had the conference call. And, you know, well, customers didn’t really have, we’ll say, definitive outlooks on what was gonna happen as a result of as a result of, you know, liberation day.

You know, there was incremental caution for sure in their language, not not caution around, hey. Is is do we need the software? Do we need to undergo digital transformation? It was really more around, hey. Nobody really knows what’s going on.

And, know, it may be that once we, you know, move to move towards deal closure that that this is gonna get delayed or downsized by, you know, by the powers that be at those respective customers just given the overall uncertainty. And I think, you know, that’s what was reflected in the, you know, revised guidance that we gave last quarter. And, you know you know, also out of caution, we we tried to model in a a downside scenario of, you know, what what if things started to look more like, you know, the GFC environment or or the COVID environment. You know, what might that look like, you know, for PTC? And that’s what led to the kind of the downside scenario of of that, you know, of that guidance.

Now as we progress through the quarter, things seem to stabilize, much more. And I think that, you know, that was obviously born out in the results. We came in near the, you know, near the high end of the guidance range, certainly for net new ARR. It came in for the high end of the guidance range. So I I think those kind of worst case fears that we all might have had seem to have alleviated.

I think that’s reflected in our current guidance. You know, we took the low end up on the on the range, essentially taking that kind of scenario, we’ll say off the table, for the year now that we’re we’re down to one quarter left to go. And as a reminder, we’re on a September 30, year end. So, you know, that that that’s where we are. So I guess just the last point on this, you know, we’ve talked a lot over the past two to three years now about kinda the challenging macro environment.

And, you know, I I guess I would say that I’m not sure that the macro environment has really changed. It just didn’t get materially worse. I’m not sure it actually really got better, but it just did not get materially worse.

Ken Wong, Software Analyst, Oppenheimer: And I think

Christian Talbatia, EVP and CFO, PTC: that’s what was reflected in the in the results in the guidance.

Ken Wong, Software Analyst, Oppenheimer: Understood. So so arguably still, you know, hopefully something, you know, something better to come down the line. But for now, just, kinda stably bad seems to be, seems to be how you’re framing what’s baked in.

Christian Talbatia, EVP and CFO, PTC: Yes. Stably consistent with the same kind of challenging environment we’ve seen for the last number of years.

Ken Wong, Software Analyst, Oppenheimer: Perfect. And I guess as we think about the close of the year, how should we frame what needs to go right for you guys to be at the high end of that ARR range? And can we maintain in this stable environment and you guys execute to that number? Does that require some help from macro or go to market or or what whatever it might be.

Christian Talbatia, EVP and CFO, PTC: Yeah. I I I think, you know, obviously, we need to execute on the opportunities we have. I think we feel very good about the pipeline that we have going into q four. You know, I think Neil commented on that on our most recent earnings call. So I think we feel good about the opportunity, and we obviously need to execute on that.

And then just on top of that, I think the the biggest variables going into, you know, where we end up in the range, really probably comes down more to deal structure. And, you know, do we see more more in quarter starts, or do we see, you know, more, you know, more ramp deal type deals that get structured here in this environment? And I and and that’s obviously what we’re working through, you know, this quarter with all with all the deals in in play.

Ken Wong, Software Analyst, Oppenheimer: Got it. And and so maybe maybe shifting gears a little bit. You guys made a big shift on the go to market when we entered the year, focus more on your core verticals. Maybe just a quick update, kind of where are we on that process? Are you done with all the changes and it’s now just a matter of executing through those changes?

Have you seen you know, any data points you can share in terms of the progress that we’re seeing there?

Christian Talbatia, EVP and CFO, PTC: Yeah. And so just as a quick refresher, remembering that a lot of the planning that went into this happened in our in our q four of last year, in our our fiscal first quarter of of this year, and the actual changes were really implemented in the beginning of our of our fiscal second quarter. And, you know, those chain when I’m talk we’re talking about those changes there, I’m really talking about getting the go to market organization aligned around, you know, the main verticals that we serve. And and go to market isn’t just sales. It means also, you know, marketing as well as customer success.

Ken Wong, Software Analyst, Oppenheimer: Mhmm.

Christian Talbatia, EVP and CFO, PTC: You know, folks in the customer success organization, presales, post sales, you know, folks who are helping implement the software at our customers or with our customers, getting those aligned around those core verticals. And on the one hand, I would and so what that involved was some, we’ll call it some account reshuffling. As you also might recall, there were certain positions that were eliminated, some of those in each of the kind of go to market organizations. And then there’s hiring back. On the sales side, it’s hiring back into the right areas.

On the customer success side, it’s making sure that we’re hiring more technical resources and so And so that shuffling was around account coverage, if you will, and territory optimization. And so on the one hand, I would say that, yes, that part of the change is done. On the other hand, I would say territory optimization is an ongoing thing that needs to continue to happen in the future. I think we’re just at a much better baseline than we’ve been at historically to continue that journey. The other parts of the transformation, which include making sure that we have the right messaging to go with each of these verticals, which includes some of the cultural changes that Rob is bringing to the organization, Those are actually still ongoing.

A lot of that messaging has now been developed. It’s being released into the field and put in front of our customers. It was tested before that, we’ll continue to get feedback. But so far, the feedback has been positive from both our own internal teams as well as what we’re hearing from customers. So that’s good.

That will also continue to be an evolution as customer requirements continue to evolve as well as our technology continues to evolve. But I think we feel pretty good about where we are with the messaging at this point. The other part of the cultural change that Rob is bringing is more focus on, we’ll call it pipeline management, pipeline hygiene. And it’s coming from a very good place. He’s looking to make sure that we have good pipeline, not only so that we have good visibility into out quarters, but also getting good visibility into what kind of requirements are tied to these pipeline.

Is there are there r and d, road map items that that are open, but but part of a, you know, a decent sized chunk of that pipeline so that he can go back and try to influence the r and d organization to make sure, hey, are we working on X, Y, and Z because we’ve got a lot of pipeline tied to this. And so where do we think we are with that? And then just the general hygiene as well, making sure that we’re using consistent stages, consistent definitions for pipeline management even internally. And then lastly, I think if I channel my inner Rob here for a second, he would also talk about the message as part of the overall cultural change that’s going on as well. And if you think about it this way, what PTC sells is or provides to our customers is is, you know, complex software that helps solve complex problems.

It’s very technical software. And, I think what he would say is we’ve been very good, and it’s been a rich part of PTC’s heritage to be very good at that technical level and to be able to engage with customers at that kind of technical level. But also a lot of what we’re helping customers do is digital transformation. And that’s a bigger initiative. And if you think about it from a perspective of, well, we can arm the head of engineering, but now that now it’s incumbent at that customer for the head of engineering to try and go sell that to the head of service manufacturing and the head of quality and, you know, and and regulatory and so on, which is more challenging when you’re trying to when you’re when you’re trying to sell internally across to a bunch of peers who have their own priorities and their own metrics.

And so what Rob’s talking about is elevating the message, making sure that we’re getting the c suite to understand not necessarily the technical components, but to understand the business value so that the c suite can get behind it and really help push those initiatives with the point being that with that kind of top down pressure, it’s a lot easier to get broader organizational alignment around kinda digital transformation and this digital transformation initiative that’s so important to our customers. And attending that, he’s also spending a good deal of time focusing on expanding our relationships with SIs that we’ve done as well because a big part of this digital transformation is, of course, OCM or organizational change management, which is really where they excel as well and a big part of the transformation for the customer. So making sure we’re having the right messaging at the right level and not forgetting the deep technical expertise that’s required, but making sure that we’re providing air cover, you know, from the highest levels so that when we get to those technical discussions, they’re they’re exactly, you know, what what they are meant to be, what’s the best way to implement the software, and what kind of change do we need to do and what kind of benefit should we be expecting.

Ken Wong, Software Analyst, Oppenheimer: Perfect. And with all these changes, I think one interesting dynamic you touched on is just aligning that product roadmap with the go to market changes. How should we think about maybe Rob incorporating pricing as a component of all this kind of product package and pricing and bundling? Is that something that we can see as a potential tailwind going forward? Any thoughts there?

Christian Talbatia, EVP and CFO, PTC: Yes. Well, certainly, he brings a perspective around around that to the organization, which I’m I’m very much aligned with. And so, you know, I think that it’s it’s part of the overall transformation, and I think we’ll continue to push on it. Of course, remembering that most of our sales are to existing customers. You know, that’s gonna be an evolution over time because they’re custom dealing in a certain way and, you know, we need to we need to, you know, migrate off of that.

But but for sure, he’s aligned and and use that as an opportunity going forward as well.

Ken Wong, Software Analyst, Oppenheimer: Understood. And it’s a reminder to the audience to the extent you have any questions, feel free to submit that into the portal. I did just get one here, so I figured I might as well toss it out now. I know you guys aren’t addressing long term at the moment, but you kind of in this environment as you look ahead with the go to market changes in play, how should we at a high level think about kind of the growth profile in the past you guys have said that this is a kind of a low double digit mid term grower. Has the environment changed that dynamic in a normal state?

What would you I guess, how would you characterize what you guys think you guys should grow?

Christian Talbatia, EVP and CFO, PTC: Yeah, really, really good question. And so I think a couple of things. One, if we look back over the past few years, we’ve been delivering in and around flat net new ARR. A couple of years have their own nuances to them, but you know, broadly speaking, in and around flat. And so, you know, we’ve also been saying pretty consistently for the past, I don’t know, ten, eleven quarters that the macro environment has been challenging.

And I guess at a certain point, you need to really ask yourself, well, is this just the new normal? And if so, what should we, could we, would we do differently to try to drive net new ARR growth just assuming that this is the new normal from a macro perspective? And that’s exactly what led us down the path of these go to market changes, some of the product initiatives, the ongoing SaaS initiative, the commercial optimization efforts that a couple of those have been underway, but a couple of those are certainly newer. I think you’ve heard Neil talk about AI and the opportunity for AI there. So all of those initiatives together, the intended result is to drive net new ARR growth.

Ken Wong, Software Analyst, Oppenheimer: Got it. So guess to kind of get back to those goals, executing on all of that plus hopefully macro cooperating is how we should think about it. Maybe shifting back now to kind of the product side of things. On PLM, clearly your guys is one of your core products, solid resurgence during COVID, during all the digital transformation. As we think about this next transformation with AI, you’ve touched on a little bit.

I mean, you see PLM kind of becoming more important to your customers? Are there opportunities to continue to see that business? I don’t want to say reaccelerate just yet, but to see that business kind of step up in terms of priorities for customers?

Christian Talbatia, EVP and CFO, PTC: I mean, I think our belief in general is that that is a strategic imperative for our customers. PLM and you could think about it even more broadly in our broader definition of PLM, which includes ALM, which includes SLM, but particularly on the product development and the product data side, how can we help our customers achieve their goals, which if I completely oversimplify, boil down to developing new, even more complex, more sophisticated products faster to help them remain competitive in the markets that they in the respective markets that they play in. And I don’t think that those pressures have alleviated for our customers at all. And in fact, maybe getting more acute in certain places.

Ken Wong, Software Analyst, Oppenheimer: Got it. Understood. Let’s see another follow-up. On the call, you guys well, you guys had touched on some elevated churn, and that well, that would come back at the end of the year. Are those contracts still on track to come back later this year?

This is from the Q1 earnings call.

Christian Talbatia, EVP and CFO, PTC: Yes, that was a couple of contracts and those are on track. And I think some of the other elevated churn that we talked about was related to a smaller handful of events, probably more concentrated in SLM and in IoT and in IoT in particular related to the end of lifing of a product that we had. And with that, that was not really a surprise to folks. They knew that was coming. And we had an off ramp for them that we proposed.

And in many cases, they selected that off ramp. And in some other cases, they chose to go a different route, which caused some elevated churn there. But again, that product has now been end of life. So I don’t think that comes back. On the SLM side, I think it has more to do with some customer specific situations, divestitures, as an example, at a couple of customers led to different decisions or M and A and divestiture activity.

Ken Wong, Software Analyst, Oppenheimer: So the 3Q stuff sounds like probably not coming back, 1Q stuff still could resurface or still expected to resurface back half of this year or I guess Q4 of this year now.

Christian Talbatia, EVP and CFO, PTC: Or has already.

Ken Wong, Software Analyst, Oppenheimer: Got it. Understood. You touched on SaaS and cloud earlier. What does the customer appetite look like for SaaS now? You guys were taking a very measured approach.

You weren’t forcing anyone to go, but it does it did sound like on the recent call that there’s maybe been a little more heightened interest. We would love to get your take there. And does it start making sense to lean into some of these customers now?

Christian Talbatia, EVP and CFO, PTC: Yes. So I think that the delivery model question is certainly one that comes up with customers and they’re I mean, I think by and large, again, oversimplifying, but in many cases, SaaS is simply a superior delivery model. And so it is of interest to customers. But then it also comes down to the change attendant with migrating to SaaS, which it isn’t just shifting the back end. But with SaaS comes more standardization.

And if you have a ten or fifteen year old legacy on prem system that needs to be migrated, that’s also going to come with a lot of this OCM work that we talked about earlier. And so I think for customers, it’s really a question of when is the right time to embark on that journey. But it’s certainly a theme that continues to come up.

Ken Wong, Software Analyst, Oppenheimer: Understood. And in a recent customer event that we got the sense that perhaps new capabilities would be streamlined to Creo plus Windchill plus with maybe a bit of a lag to the on prem customers. Should we view that as maybe the early stages of you guys trying to facilitate that transition to SaaS a little sooner? And any thoughts there?

Christian Talbatia, EVP and CFO, PTC: Yes. I mean, I think that’s right. We do want to try to create some differentiation there while making sure that we still have a large and important customer base that is on prem. We obviously don’t want to leave any of those customers stranded, if you will, as well. So it’s a balance that we’re trying to strike and just trying to, again, help facilitate that discussion.

Ken Wong, Software Analyst, Oppenheimer: Got it. A follow-up question sent to me. Just on cloud, again, early days in terms of adoption there, but are you still seeing the type of economic uplift that you guys were initially thinking? I think it was kind of roughly 2x. Any changes in terms of how that has played out?

Christian Talbatia, EVP and CFO, PTC: No, I think that’s still ballpark the right number, what the actual uplift is for any given customer situation, depends on a whole bunch of different variables, could be a little more, could be a little less, but I think that’s still the right ballpark.

Ken Wong, Software Analyst, Oppenheimer: Perfect. And I tried to delay asking about AI for as long as I could, but not surprising this is always top of mind, especially in this current environment that we’re in. PTC serves as the sort of the system of record for product data. I guess how do you guys envision your value in the ecosystem? And then two, to the extent you guys are prioritizing AI development in your products, like how do we see that get monetized over time?

What’s the feedback been from customers for any early use cases?

Christian Talbatia, EVP and CFO, PTC: Yeah. So number one, I guess first point would be, I think that you’re spot on about, we’ll call it system of record for product information and really for customers to be able to extract as much value as they can from AI. It starts with making sure that your own data house is in order, right? And that, again, goes back to this whole digital transformation theme. An outcome of that is making sure that the data house is in order.

And then secondly, excuse me, it’s still early days in terms of the AI products that we have rolled out, right? Just last quarter, we actually started with ServiceMax AI. And when we were talking about AI, just to be clear, what I’m talking about now is AgenTic AI use cases. We’ve had generative AI in Creo, for example, for a number of years now, and I think Anshape more recently through a previous acquisition that we did back in 2017. But what we’re really talking about now is AgenTik AI.

And so we’re definitely in the early days of that. Again, just went GA last quarter. AI is certainly something that comes up in almost every customer conversation. And it’s on our roadmap as well. I think here, kind of around the turn of the calendar year plus or minus, you should see CodeBeamer, AI agents, and Windchill agents also become GA as well.

And then I guess if you were to think about longer term, those are agents for ServiceMax within ServiceMax, CodeBeamer within CodeBeamer, Windchill within CodeBeamer I mean, within Windchill. And over the longer term, I think you’d want to start to see agents working across those silos and then eventually also agents interacting with with other enterprise systems that our customers use. You know? But now we’re we’re we’re we’re talking about the future. In terms of monetization, you know, I think it’s a it’s a really good question.

As you know, most of the software that we virtually all the software that we sell is on a per seat basis. And, you know, even with ServiceMax, the agents that are now available, those are also priced on a per seat basis. But it does raise interesting opportunities for us to think about, you know, what the best way to monetize that is. Is it on a per seat basis? Is it on a consumption basis?

How is it that customers are going to be willing to pay for that value? And so I think we’re in a bit of an evolving landscape there. But that’s the, you know, that’s the the path that we’re on right now, is starting off with, you know, on a proceed basis and and and working through what the other alternatives, might look like.

Ken Wong, Software Analyst, Oppenheimer: Understood. And then let’s perhaps switch over to numbers. It would seem a shame that we’ve got you here and not at least touch on some numbers. You’ve got that or you had $1,000,000,000 free cash flow target for next year out there. You guys are obviously progressing towards fiscal twenty twenty five, but there’s also been some kind of puts and takes from currency and taxes and whatnot that could be in play.

How should we think about kind of where you stand as we approach that ’26 target? Help us think through some of the moving pieces.

Christian Talbatia, EVP and CFO, PTC: Yes. So one that has certainly been top of mind is currency, FX rates in general. I think where FX rates sit today, we’ve seen a little bit of tailwind, if you will, in the back half, but remembering that it was a pretty significant headwind in the first half. So I think for the year, FX is still a net headwind for us this year. But if the rates stay where they are going into next year, that should be a net positive.

Additionally, we’ve taken out some puts on the euro and the yen to help mitigate any potential not all, but some of the potential headwind from a strengthening dollar should that happen throughout the course of next year. So I think we view that as a comforting factor. On the tax front, as you know, the OBBB has reversed some of the change that was introduced earlier as it relates to Section 174 in the revenue code, which had to do with the capitalization of R and D capitalization and then amortization of R and D expense. And the change really affects U. S.

R and D, International R and D is still going be capitalized and amortized. But there’s there will be some tailwind from that as well, which I think we feel also incrementally more comfortable with. Still some work to do to decide exactly which path we go down. There’s different potential outcomes that are nuanced. So we still have some work to do to figure that out.

But net net, it should a tailwind for us. And then, of course, also interest rates matter to a certain degree, although going into next year to a much lesser degree than we’ve seen over the past few years because going into next year, think we’ll have probably around $1,200,000,000 of debt. Dollars 500 of that’s a high yield note at 4%. So you’re left with about $700,000,000 on a variable rate. But so the impact of interest rate changes is much more muted than it has been historically.

And then of course, lastly, we need to figure out how we’re going to end this year and equally what the plan for next year looks like. How much incremental ARR do we think we’re going to add next year? And what does our spending for next year look like as well? And we’re in the middle of our planning process, so that’s all work to be completed.

Ken Wong, Software Analyst, Oppenheimer: Got it. And on that last point, perfectly segues into a question that just hit my inbox, but I realize you guys are not baking in go to market improvements just yet, not baking in macro improvements. Is the right way to think about that net new ARR, net new ARR that it’s stable to how fiscal twenty twenty five closes out, like just based on the information that we have today?

Christian Talbatia, EVP and CFO, PTC: Yes. I think we’ll provide fiscal twenty twenty six guidance when we issue our Q4 results. I think that’s probably the best way to leave that one.

Ken Wong, Software Analyst, Oppenheimer: Got it. You someone was going to try to ask something ahead of time, but respect the game there. And then just while we’re here at the end, kind of comfortable with the current leverage levels, how should we think about the prioritization of deploying cash? I mean, buyback has been kind of a nice return this year, but you guys have all spent a little more quiet on the M and A front. Like what are you looking at?

What are you prioritizing?

Christian Talbatia, EVP and CFO, PTC: Yes. Well, so just to I think kind of reiterate the general view on, we’ll call it capital allocation is first, a couple of fundamental. Number one, we believe that PTC should operate in a net debt position. Number two, just given the consistency of invoicing and the expenses that we have and therefore the consistency of the free cash flow generation, we also think that we should try to run this business with as lower cash balance as we can. And what that then ultimately means is anything that’s left that doesn’t get used, for example, for M and A, we think that should be returned to shareholders via share repurchases.

Ken Wong, Software Analyst, Oppenheimer: All right, Perfect. And with that, I think we are right up on time. I don’t have any other questions in my queue. So Christian, thank you so much for taking some time out of your day to interact with us and to the audience. Really appreciate you guys all dialing in.

Christian Talbatia, EVP and CFO, PTC: Great. Thanks, everybody. Thanks, Ken, for having us at the conference.

Ken Wong, Software Analyst, Oppenheimer: Thank you. Bye, Matt. Bye, Christian.

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