Why Is PTC Inc. (PTC) Down 6.4% Since Last Earnings Report?

It has been about a month since the last earnings report for PTC Inc. (PTC). Shares have lost about 6.4% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is PTC Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. PTC's Q1 Earnings Beat EstimatesPTC reported first-quarter fiscal 2025 non-GAAP earnings per share (EPS) of $1.10, beating the Zacks Consensus Estimate by 20.9%. The company reported non-GAAP EPS of $1.11 in the prior-year quarter. Revenues came in at $565 million, up 3% year over year (up 2% at constant currency or cc). The top line beat the consensus estimate by 2.4%.  Despite a challenging sales environment, the top line came close to the upper limit of PTC’s guidance, backed by strong demand for its product lifecycle management (PLM) and computer-aided design (CAD) solutions.As part of its broader strategic realignment, PTC has begun restructuring its go-to-market organization during the quarter to align with key vertical industries. This move is expected to drive long-term growth and optimize operations.Top-Line DetailsRecurring revenues of $524.3 million rose 3.6% year over year. Perpetual licenses increased 11.4% to $9.4 million.Revenues by License, Support and ServicesLicense revenues (30.6% of total revenues) were $172.8 million, down 6.1% from the year-ago quarter figure.Support and cloud services revenues (63.9%) of $361 million increased 9.2% year over year.Professional services revenues (5.5%) were $31.4 million, down 12.1% year over year.Revenues by Product GroupPLM and CAD businesses continue to experience solid growth momentum. In the fiscal first quarter, PLM revenues were $353 million, up 1% year over year. CAD revenues were $212 million, up 5% year over year.ARR PerformanceAnnualized recurring revenues (ARR) were $2.205 billion, up 7% year over year. At constant currency, ARR was $2.277 billion, up 11% year over year. The uptick was driven by strong performance across all divisions and geographies.In the fiscal first quarter, PLM and CAD ARR were $1,357 million and $848 million, rising 8% and 5% year over year, respectively.Operating DetailsNon-GAAP gross margin remained flat year over year at 82.7%.Total operating expenses increased $17 million year over year to $338 million.Operating income on a non-GAAP basis fell 4% year over year to $191 million.Operating margin on a non-GAAP basis increased 240 basis points on a year-over-year basis to 34%.Balance Sheet & Cash FlowAs of Dec. 31, 2024, cash and cash equivalents were $196 million compared with $266 million as of Sept. 30, 2024.Total debt, net of deferred issuance costs, was $1.544 billion as of Dec. 31, 2024, compared with $1.748 billion as of Sept. 30, 2024.Cash provided by operating activities was $238 million compared with the prior-year quarter’s figure of $187 million.The free cash flow was $236 million compared with $183 million reported in the year-ago quarter.Financial OutlookFor the second quarter fiscal 2025, PTC estimates revenues in the $590-$620 million band. Non-GAAP EPS is projected in the range of $1.30-$1.50. Cash from operations is expected to be $274 million, and free cash flow is forecasted to be $270 million.Revenues for fiscal 2025 are now projected in the range of $2,430-$2,530 million, indicating a rise of 6-10% year over year. The prior view was $2,505 to $2,605 million. Non-GAAP EPS is now estimated in the $5.30-$6.0 band, suggesting a rise of 4-18%. Earlier, PTC predicted the metric to be $5.60 to $6.30.For fiscal 2025, cash from operations is projected between $850 million and $865 million, indicating a rise of 13% to 15% on a year-over-year basis, unchanged from the prior guidance. The free cash flow is forecasted in the $835-$850 million band, suggesting a 14% to 16% increase, the same as before.PTC continues to project 9% to 10% growth in ARR on a constant currency basis for fiscal 2025. How Have Estimates Been Moving Since Then?It turns out, estimates revision have trended downward during the past month.The consensus estimate has shifted -8.27% due to these changes.VGM ScoresAt this time, PTC Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PTC Inc. has a Zacks Rank #3 (Hold). 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