It has been about a month since the last earnings report for PTC Inc. (PTC Quick QuotePTC - Free Report) . Shares have added about 1.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is PTC Inc. due for a pullback? 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 Q2 Earnings Beat Estimates

PTC reported second-quarter fiscal 2024 non-GAAP earnings per share (EPS) of $1.46, up 26% on a year-over-year basis. Also, the figure surpassed the Zacks Consensus Estimate by 18.7%.

Revenues came in at $603 million, up 11% year over year (up 11% at constant currency or cc). The top line beat the Zacks Consensus Estimate by 4.8%.
The year-over-year improvement in the top line was driven by steady demand for its computer-aided design (CAD) and product lifecycle management (PLM).

Top Line in Detail

Recurring revenues of $564 million rose 14.6% year over year. Perpetual licenses decreased 24.3% to $6.7 million.

Revenues by License, Support and Services

License revenues (38.9% of total revenues) were $234.3 million, up 18.9% from the year-ago quarter’s figure.

Support and cloud services revenues (55.8%) of $336.4 million increased 10.6% year over year.

Professional services revenues (5.3%) were $32.3 million, down 21.4% year over year.

Revenues by Product Group

PLM and CAD businesses continue to witness healthy growth. In the fiscal second quarter, PLM revenues were $373 million, rising 8% year over year. CAD revenues were $230 million, up 16% year over year.

ARR Performance

Annualized recurring revenues (ARR) were $2.088 billion, up 11% year over year (up 12% at cc). The uptick was driven by strong performance across all divisions and geographies.

In the fiscal second quarter, PLM and CAD ARR were $1,275 million and $814 million, rising 12% and 9% year over year, respectively.

Operating Details

Non-GAAP gross margin increased 230 basis points (bps) on a year-over-year basis to 84.2%.

Total operating expenses increased $7 million year over year to $313 million.
Operating income on a non-GAAP basis increased 22.7% year over year to $254 million.

Operating margin on a non-GAAP basis increased 390 bps on a year-over-year basis to 42%.

Balance Sheet & Cash Flow

As of Mar 31, 2024, cash, cash equivalents and marketable securities were $249 million compared with $265 million as of Dec 31, 2023.

Total debt, net of deferred issuance costs, was $2.005 billion as of Mar 31, 2024, compared with $2.260 billion as of Dec 31, 2023.

Cash provided by operating activities was $251 million compared with the prior-year quarter’s figure of $211 million.

The free cash flow was $247 million compared with $207 million reported in the year-ago quarter.

Fiscal 2024 Guidance

For fiscal 2024, ARR is expected to be in the range of $2.200-$2.240 billion, which indicates a rise of 11-13% year over year at cc.

Revenues for fiscal 2024 are projected to be in the range of $2.270-$2.340 billion, indicating a rise of 8-12% year over year.

For fiscal 2024, cash from operations is projected to be $745 million, indicating a rise of 22% on a year-over-year basis. The free cash flow is forecasted to be $725 million, suggesting a 23% increase year over year.

For the fiscal third quarter, PTC expects ARR between $2.115 and $2.130 billion. Cash from operations is projected to be $225 million, and free cash flow is forecasted to be $220 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -23.96% due to these changes.

VGM Scores

At this time, PTC Inc. has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates 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). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

PTC Inc. is part of the Zacks Computer - Software industry. Over the past month, Cadence Design Systems (CDNS Quick QuoteCDNS - Free Report) , a stock from the same industry, has gained 4.3%. The company reported its results for the quarter ended March 2024 more than a month ago.

Cadence reported revenues of $1.01 billion in the last reported quarter, representing a year-over-year change of -1.2%. EPS of $1.17 for the same period compares with $1.29 a year ago.

Cadence is expected to post earnings of $1.25 per share for the current quarter, representing a year-over-year change of +2.5%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.4%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Cadence. Also, the stock has a VGM Score of D.