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PTC Inc. Idea Proposal (PTC)

PTC Inc. Idea Proposal (PTC)
 

Will PTC’s focus on the Internet of Things, augmented reality, and the cloud boost its growth rate?

Report Available: March 11, 2021

 

Blueshift’s initial research found PTC surpassing modest expectations but still mostly tied to mature, relatively low-growth markets with its core products. PTC executives believe they can break into a higher growth pattern with a shift to cloud-based delivery, a focus on the emerging industrial Internet of Things (IoT), and new offerings around augmented reality (AR). However, its cloud platforms could cannibalize its core on-premise products, while growth in IoT and AR will take not only innovative solutions but broader market acceptance than has happened to date.

 

Observations

  1. PTC, a maker of product design and management software, beat Wall Street estimates in its fiscal Q1. Revenues climbed 20% year-over-year to $429 million on the strength of better-than-expected large deal activity. Annual recurring revenue (ARR) was up 12% in constant currency to $1.34 billion, driven by momentum in the company’s core and growth businesses. In the wake of the strong Q1, company executives raised their forecast for full-year ARR, estimating growth of 16% to 18%.
  2. PTC’s core business revolves around on-premise versions of its computer-aided design (CAD) software, Creo, and its product lifecycle management (PLM) suite, Windchill. While both CAD and PLM are mature markets with percentage growth rates in the high single digits or low double digits, PTC executives believe they can outpace the market by stealing share from competitors like Aras, SIEGY, and DASTY. In Q1, ARR for the Creo business was up in the high single digits, while growth around Windchill was in the mid-teens. Creo is starting to benefit from a partnership with ANSS, executives said, as the design and simulation software markets begin to converge.
  3. One of the pivots PTC is trying to make to keep up with the digital transformation of enterprise operations is to deliver its solutions through the cloud. To that end, the company has made two major acquisitions: spending $715 million to purchase Arena Solutions, a developer of cloud-based PLM software, in a deal that closed in January; and paying $470 million for OnShape, a cloud-based CAD platform built by former top executives of SolidWorks. PTC announced in its latest earnings call that it is organizing these segments into a new Software-as-a-Service (SaaS) business unit, along with its Vuforia AR suite. Bookings for Vuforia, which is aimed at helping enterprises develop AR technology, were up 80% in fiscal Q1. The new SaaS business unit is “paving the path for a future PTC,” CEO Jim Heppelmann said. However, as of the end of its fiscal Q1, the segment accounted for less than 10% of the company’s ARR, and there is some fear that PTC’s new cloud-based offerings could cannibalize some of its on-premise Creo and Windchill sales.
  4. PTC says its biggest growth opportunity may be in the industrial IoT market, as product designers work to add data-gathering sensors to factory equipment. PTC has pitched its ThingWorx suite as an end-to-end platform to help companies develop and rapidly deploy industrial IoT applications. It has an alliance with MSFT to deploy ThingWorx on Azure and has a strategic  partnership with ROK to take PTC’s IoT technology into Rockwell’s large manufacturing customer base and smart factory applications. In October, PTC was named one of the leaders in Gartner’s Magic Quadrant for industrial IoT, along with MSFT and Hitachi (TYO: 6501). Revenue in this segment, however, has been somewhat slow to materialize.

 

How big is the opportunity for PTC in IoT? Does it have the right technology for that market? Does its AR suite meet the needs of enterprises? What kind of momentum is PTC developing with is cloud platform? To what extent might OnShape and Arena cannibalize on-premise sales of Creo and Windchill? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: PTC customers, Competitor customers, Channel partners, and Industry specialists. 

 

Companies: PTC Inc. (PTC), Ansys Inc. (ANSS), Dassault Systemes (DASTY), Hitachi Ltd. (TYO:6501), Microsoft Corp. (MSFT), Rockwell Automation Inc. (ROK), Siemens AG (SIEGY)

 

Research Begins: February 22, 2021

 

To see other ideas Blueshift Research is currently working on, please click here.

 

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