The sum of Windchill, Arena and Codebeamer are greater than PLM by Siemens or Dassault Systèmes, says PTC in its Q4 call.

Revenue being up by 10 percent in a quarter may sound impressive, especially compared to more modest increases posted by the competition, but PTC’s revenue has been a see-saw performance over the last 7 quarters. Q4 revenue over Q2 revenue is marginal. Perhaps more revealing is the company’s profit of $107 million, the highest since FY21 Q2, and a freaky FY21 Q4 that has a $293 million windfall. FY22 revenue totaled $1.93 billion, up 7 percent from the previous year, and profit was an impressive $478 million for the year. PTC ended up with $272 million in the bank at end of the fiscal year, down from $327 million in 2021.
“Fiscal ’22 was PTC’s best year in decades,” crowed Heppelmann during the financial call. But don’t get too excited, he was to warn a little later. The Winter PTC and other design software companies have managed to avoid what may be finally coming.
The U.S. dollar’s strength against European currencies cost PTC $9.6 million in the quarter and over $24 million during the year, but that was offset by the company’s “solid execution, the timing of our collections and prudent cost controls,” said Jim Heppelmann, president and CEO.
“Prudent cost controls” may be corporate speak for the increased product pricing imposed on customers by PTC during the fiscal year.
PTC stated a total organic annual recurring revenue (ARR) growth of 16 percent across all its divisions, led by the board in Digital Thread Core (Creo, Windchill), Digital Thread Growth (IoT and AR), FSG and Velocity. FY12 was the second consecutive fiscal year with a 16 percent increase in ARR.
The divisions named above are peculiar to PTC and are little understood by the rest of the industry. Fortunately, this may be the last we hear of them, as the following passage reveals.
“If we recast last year into the new model, then inside a $1.71 billion ARR company, growing 16% last year, we had a $756 million ARR CAD business growing 11% and a $950 million ARR PLM business growing 20%,” said Heppelmann.
The more traditional nomenclature will allow PTC some bragging rights.
“PTC has become the clear category leader in the hot PLM market by some distance,” said Heppelmann, as the company is now ahead of Siemens Teamcenter and Dassault Systèmes. “With a growth rate well ahead of these competitors in recent years, we are rapidly widening the leadership gap.”
PTC stopped doing business with Russia due to its invasion of Ukraine, but except for that, overall “churn,” or what PTC calls nonrenewal of subscription licensing, was the lowest in “several years.”
PTC continues to pat itself on the back for its swing toward software as a service (SaaS) product and predicts that it will lead to even bigger margins in the next fiscal year. The company restructured a year ago to position itself as a SaaS-first company with its Atlas “platform of the future” and thinks that in FY23, with the restructuring costs behind it, will be a great year financially despite the effects of the “scary headlines we continue to read every day.”
PTC’s main cloud offerings are Onshape CAD and Arena PLM.
PTC has for several years been expanding beyond its CAD and PLM core, but Q4 served as a reminder of its main breadwinners. FY22 Q4 recorded the strongest ARR “magnitude” growth, while the SaaS products (Onshape and Arena) recorded the highest percentage growth. Windchill may have been the brightest star, posting a 19 percent increase in ARR in Q4. It was the 20th quarter in a row that the CAD and PLM product lines recorded double-digit growth.
Raymond Corporation, a warehouse forklift manufacturer, was a recent win for PTC with its purchase of Windchill licenses.
Heppelmann said that Arena PLM products are seeing a 20 percent growth year over year, 10 points higher than they were doing before the acquisition.
PTC appears to be signaling that the long-feared economic downturn is finally coming. The company set next fiscal year guidance at 10-14 percent growth in ARR, which would result from a 15 percent decline in bookings and more churn. But not to worry, says Heppelmann. Even if bookings declined 75 percent, ARR growth would only go flat, not down.