PTC Inc. Fireside Chat at Baird Global Consumer, Technology & Services Conference 2025: Growth Strategies, AI Integration, and Market Positioning in Technical Software Sector

Key Takeaways

TL;DR: PTC is evolving its GTM model and product integration to restore net new ARR growth amid macro headwinds, while exploring early-stage Agentic AI oppt'ys and leveraging a resilient, diversified end market.

• Overview & Growth Outlook
  • PTC reported near $2.5B in rev., w/ a heavy subscription focus (both on-prem and SaaS) and emphasis on billing and FCF over traditional EPS due to ASC 606 impacts.
  • Historical net new ARR growth has been ~$220M per year, though current guidance for 2025 is slightly lower given macro uncertainties and a growing installed base diluting % growth.
  • Key Insight: The co seeks to reinvigorate net new ARR by balancing growth in the legacy base and accelerating new logo acquisition.
• Go-to-Market (GTM) Evolution
  • Verticalization & Integration: PTC is formalizing vertical-based teams across sales, marketing, and customer success (e.g., automotive, aerospace, industrials) to ensure deeper industry expertise and better alignment w/ customer needs—including regulatory nuances.
  • Territory Optimization: Rebalancing long-held territories to ensure even newer sellers gain access to quality oppt'ys, ultimately improving quota attainment.
  • The introduction of new Chief Revenue Officer, Rob Dahdah, is set to elevate C-suite engagement and enforce disciplined pipeline metrics across geographies and verticals.
• Product Integration & Modernization
  • Core Product Focus: The portfolio now centers on Creo, Windchill, CAD/PLM, ALM (Codebeamer), and SLM (ServiceMax), while de-emphasizing IoT/AR for core operations.
  • Integrated Solutions: Emphasis on tightly integrating ALM and PLM; this alignment supports customers managing both hardware and software requirements in increasingly complex products.
  • The ongoing SaaS transition continues to be seen as a tailwind toward sustaining rev. growth and simplifying product bundling.
• AI Developments
  • Agentic AI Initiatives: Early-stage rollouts in ServiceMax, w/ upcoming AI capabilities in Codebeamer and Windchill/ALM, represent a nascent but promising market for improved customer outcomes.
  • PLM as a Modernization Lever: Customers are increasingly viewing their PLM systems as critical enablers to clean, structured data needed for effective AI deployments.
  • Key Quote: “Getting their data house in order so that they can deploy AI more effectively, I think that is the place for them to start.”
• Commercial Optimization & Renewals
  • With a mix of multiyear contracts coming up for renewal, PTC emphasizes not an increased volume of renewals but a higher ARR base due to contract size.
  • Historical resilience during previous macro disruptions (GFC 2009, COVID 2020) suggests that renewal rates remain strong, even if new biz may momentarily slow.
  • Investor Signal: Robust renewal trends provide support to the co’s rev. stability amid uncertain macro conditions.
• End Market Exposure & Strategic Partnerships
  • Diversified End Markets: Exposure to industrial machinery, aerospace/defense, automotive, and high-tech electronics creates a balanced biz mix. Aerospace and defense segments, in particular, are currently performing well, offsetting pressures in industrials and auto.
  • Strategic Partnerships: Ongoing collaborations—such as discussions w/ NVIDIA within the Omniverse ecosystem—highlight future growth potential and cross-industry innovation oppt'ys.

Call Q&A

• Joseph Vruwink: Is much of PTC's growth w/ an existing installed base that you need to keep growing further with as opposed to new logos?
  • Kristian Talvitie: It's a nuanced question. Historically, we've added a consistent amount of net new ARR, but macro uncertainties have led us to guide slightly less this year. We see oppt'ys to grow w/ existing customers and have initiatives to augment growth.
• Joseph Vruwink: What were some internal observations leading to the go-to-market evolution, and how are you addressing them?
  • Kristian Talvitie: We are verticalizing the go-to-market organization, aligning sales, marketing, and customer success w/ industry-specific needs. We've optimized territory coverage and added a new Chief Revenue Officer to elevate messaging and improve sales processes.
• Joseph Vruwink: How do recent conquest wins relate to go-to-market changes versus other industry imperatives?
  • Kristian Talvitie: It's premature to attribute wins to the transformation. The industry enjoys high retention rates, and switching systems like CAD or PLM happens periodically. We celebrate these wins as recognition of our investments.
• Joseph Vruwink: What is interesting about Codebeamer and ServiceMax for the heritage installed base, and how do you drive better selling effectiveness?
  • Kristian Talvitie: Customers want to manage product requirements holistically, integrating ALM and PLM. Complex products in the field require efficient service management, linking PLM and SLM. Our focus is on solving customer problems w/ these integrations.
• Joseph Vruwink: Is PLM modernization a driver for AI development in engineering?
  • Kristian Talvitie: Yes, PLM is the system of record for product information. Getting data in order is crucial for deploying AI effectively, and it's part of the digital transformation journey.
• Joseph Vruwink: Are new AI products more consequential than PLM system upgrades financially?
  • Kristian Talvitie: It's early days for our AI offerings. While there's interest, the financial impact remains to be seen. PLM upgrades are significant, but AI is a nascent offering.