PTC is helping to connect and manage the physical and digital worlds in the infrastructure sector.
The industrial software company offers earnings resiliency
Lee Samaha (PTC): The company sees some signs of a slowdown in the form of softer bookings, but that shouldn't detract from the resiliency of its business in 2023, its long-term growth potential, or even its potential to ramp free cash flow (FCF) generation in the coming years.
For those new to PTC, the company provides computer-aided design (CAD) and product lifecycle management (PLM) software, which helps customers digitally design and manage physical products. In addition, its service lifecycle management (SLM) integrates with PLM in assisting users with better service products. Meanwhile, the internet of things (IoT) connects the physical and digital worlds. Its augmented reality (AR) uses the digital world to facilitate better functioning in the physical world. As such, PTC is a play on the increasing use of digital technology in the industrial world.
It's a solid secular trend likely to pick up in growth from any recession. As for the earnings resiliency, PTC has $1.6 billion in annual run rate (ARR), defined as "the annualized value of our portfolio of active subscription software, cloud, SaaS, and support contracts as of the end of the reporting period." With its ARR growing at a mid-teens rate in the first quarter of its financial 2023 and management forecasting 22%-25% growth in ARR (including 11% from an acquisition) for the full-year.
In addition, more of PTC's earnings are set to drop into FCF, with management forecasting $575 million in FCF for 2023 compared to
It all adds up to a business with plenty of long-term growth potential to ride out any recession and energy stronger.
