PTC Inc. 10-Q Filing Summary
Business Context and Reporting Period
Company: PTC Inc.
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended March 31, 2026
Business Overview: PTC is a global software company providing product lifecycle management (PLM) and computer-aided design (CAD) solutions. The company operates as a single reportable segment with a subscription-based business model, where approximately 95% of revenue is recurring.
Key Financial Metrics
| Metric (in millions) | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Total Revenue | $774.3 | $636.4 | $1,460.1 | $1,201.5 |
| Recurring Revenue | $743.4 | $601.5 | $1,400.7 | $1,125.9 |
| Operating Income | $295.8 | $223.5 | $516.9 | $339.0 |
| Net Income | $590.7 | $162.6 | $757.2 | $244.9 |
| Diluted EPS | $4.98 | $1.35 | $6.35 | $2.02 |
| Operating Cash Flow | $320.9 | $281.3 | $590.7 | $519.7 |
| Free Cash Flow | $318.2 | $278.5 | $585.7 | $514.2 |
| Cash & Equivalents (End of Period) | $439.1 | $184.4 | $439.1 | $235.7 |
| Total Debt | $1,200.0 | $1,200.0 | $1,200.0 | $1,200.0 |
Annual Run Rate (ARR): $2.36 billion as of March 31, 2026 (3% growth vs. prior year; 11% growth excluding divested businesses).
Material Changes vs. Prior Period
- Divestiture Impact: On March 13, 2026, PTC completed the sale of its Kepware and ThingWorx businesses for total consideration of $530.8 million ($523.3 million cash received). This resulted in a recognized gain of $462.6 million, significantly boosting Net Income and EPS for the period.
- Revenue Growth: Total revenue increased 22% year-over-year in Q2 2026. Software revenue grew 24%, driven by license revenue growth (43% increase) and support/cloud services growth (10%). Professional services revenue declined 17% as the company shifts to a partner-led delivery model.
- Operating Expenses: Operating expenses increased 19% in Q2 2026, primarily due to $27 million in divestiture-related charges, increased compensation costs, and higher stock-based compensation.
- Share Repurchases: The company repurchased $826 million of common stock in the first six months of 2026, including a $375 million Accelerated Share Repurchase (ASR) agreement entered into in March 2026.
Guidance, Outlook, and Risks
Management Commentary: Management attributes cash flow growth to resilient top-line performance and operational discipline. The divestiture of Kepware and ThingWorx is expected to allow PTC to focus on its core PLM and CAD portfolios. The company continues to invest in AI-driven transformation capabilities.
Risks and Contingencies:
- Macroeconomic Factors: Risks include global trade tensions, import tariffs, volatile foreign exchange rates, and high interest rates, which could delay customer purchases.
- Divestiture Execution: Risks related to the transition services agreement (TSA) and potential disruption to business operations following the sale.
- Tax Matters: The effective tax rate for the six months ended March 31, 2026, was 20%, impacted by the geographic mix of income and a $102.4 million tax expense on the divestiture gain. The company is under audit in several jurisdictions.
- AI Adoption: Success depends on customers building product data foundations necessary for AI-driven transformation.
Investor Verification Checklist
- Divestiture Accounting: Verify the classification of the $462.6 million gain as "Other income, net" and the associated $102.4 million tax provision.
- Recurring Revenue Quality: Confirm the 95% recurring revenue mix and the specific impact of the Kepware/ThingWorx exit on future ARR growth rates.
- Share Repurchase Capacity: Review the remaining authorization under the $2 billion repurchase program (approx. $950 million remaining as of March 31, 2026) and the settlement terms of the $375 million ASR.
- Debt Covenants: Confirm compliance with financial covenants under the $1.25 billion revolving credit facility and $500 million term loan, particularly given the recent cash outflows for buybacks.
- Non-GAAP Reconciliations: Review the reconciliation of Non-GAAP operating income ($410.7 million) to GAAP operating income ($295.8 million) to understand the magnitude of excluded items like stock-based compensation and divestiture charges.