Engineering and design software provider PTC (NASDAQ:PTC) announced better-than-expected results in Q1 CY2024, with revenue up 11.2% year on year to $603.1 million. On the other hand, next quarter's revenue guidance of $532.5 million was less impressive, coming in 9.2% below analysts' estimates. It made a GAAP profit of $0.95 per share, improving from its profit of $0.53 per share in the same quarter last year.

Is now the time to buy PTC? Find out by accessing our full research report, it's free.

"In our second fiscal quarter, we again delivered solid results. We have a differentiated strategy that leverages our unique product portfolio to enable our customers with their digital transformation journeys. Our consistent ARR and free cash flow growth continues to highlight the value we are bringing to our customers and the stability of our business model," said Neil Barua, CEO, PTC.

Used to design the Airbus A380 and Boeing 787 Dreamliner commercial airplanes, PTC’s (NASDAQ:PTC) software-as-service platform helps engineers and designers create and test products before manufacturing.

Design Software

The demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games, 3D tours or interactive movies.

Sales Growth

As you can see below, PTC's revenue growth has been unremarkable over the last three years, growing from $461.8 million in Q2 2021 to $603.1 million this quarter.

This quarter, PTC's quarterly revenue was once again up 11.2% year on year. We can see that PTC's revenue increased by $52.86 million quarter on quarter, which is a solid improvement from the $3.59 million increase in Q4 CY2023. Shareholders should applaud the acceleration of growth.

Next quarter, PTC is guiding for a 1.8% year-on-year revenue decline to $532.5 million, a further deceleration from the 17.3% year-on-year decrease it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 9.7% over the next 12 months before the earnings results announcement.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefitting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. PTC's free cash flow came in at $247.1 million in Q1, up 19.3% year on year.

PTC has generated $638 million in free cash flow over the last 12 months, an eye-popping 28.5% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.

Key Takeaways from PTC's Q1 Results

We enjoyed seeing PTC exceed analysts' billings expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. On the other hand, its revenue guidance for next quarter missed analysts' expectations and its full-year revenue guidance missed Wall Street's estimates. Overall, the results could have been better. The stock is flat after reporting and currently trades at $174.75 per share.

PTC may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.