PTC

PTC is a best-in-class industrial software franchise (CAD, PLM, SLM) with the economics to match: an 83.8% gross margin, 35.9% GAAP operating margin (48% non-GAAP), 26.8% net margin and 19.2% ROE. The durable engine is its subscription base — ARR grew 10% (8.5% constant currency) to $2.48B and total recurring revenue rose 22% to $2.60B, the metric that best reflects underlying demand. The headline FY2025 revenue jump of 19.2% to $2.74B and the 95% surge in diluted EPS to $6.08 are real but partly amplified by ASC 606 timing on on-premises subscription contracts (higher total contract value and longer average durations recognized this year), so the run-rate is closer to the 10% ARR growth than the 19% reported.

Capital discipline is excellent. Operating cash flow grew 15.7% to $868M and free cash flow rose 16% to $857M on minimal capex ($11M); management used it to repay $553M of net debt and repurchase $300M of stock. The balance sheet de-levered as a result — total liabilities fell 11.9%, long-term debt dipped to $1.17B (4.9% weighted rate), and current debt dropped 95.2%, leaving liabilities/equity at a comfortable 0.73x. The pending sale of the Kepware and ThingWorx (IoT) businesses to a TPG affiliate for up to $725M further sharpens the portfolio around core CAD/PLM and frees capital for buybacks and tuck-in M&A.