-- Divestiture of Kepware Industrial Connectivity and ThingWorx IoT
businesses enables PTC to increase focus on Intelligent Product Lifecycle
vision
-- Updating post-divestiture financial guidance for FY'26 and Q2'26
-- Net after-tax proceeds from the divestiture will be used for share
repurchases; Announcing $375 million accelerated share repurchase program
BOSTON, March 16, 2026 /PRNewswire/ -- PTC $(PTC)$ today announced it has completed the previously announced sale of the company's Kepware$(R)$ industrial connectivity and ThingWorx(R) Internet of Things (IoT) businesses to TPG, a leading global alternative asset management firm.
"We are pleased to complete the divestiture of our Kepware and ThingWorx businesses as we increase our focus on our Intelligent Product Lifecycle vision," said Neil Barua, President and CEO, PTC. "We want to thank the teams moving over for their years of service, and we wish them well moving forward."
Financial Details
PTC received cash proceeds of $523 million upon closing (previously estimated at $525 million), reflecting closing adjustments of $42 million related to working capital and indebtedness (previously estimated at $40 million). Net after-tax transaction proceeds will be approximately $375 million (previously estimated at approximately $365 million), after the payment of divestiture-related costs of approximately $40 million (previously estimated at approximately $35 million) and cash taxes related to the divestiture of approximately $110 million (previously estimated at approximately $125 million).
PTC will use the net after-tax proceeds for share repurchases and intends to enter into a $375 million accelerated share repurchase agreement in Q2'26, with final settlement expected in Q3'26.
As expected, we are updating our guidance for cash flow, revenue, and EPS to account for the divestiture. There are no additional changes to our previous guidance provided on February 4, 2026.
Full Fiscal Year 2026 and Second Fiscal Quarter Guidance
$ in millions, Q2'26
except per FY'26 Guidance Guidance
share amounts % FY'26 Excluding Q2'26 Excluding
rounded to the Previous Kepware and Previous Kepware and
nearest half Guidance ThingWorx(3) Guidance ThingWorx(3)
Constant
currency ARR
excluding
Kepware and
ThingWorx
(FY'26 Plan FX 7.5% to 9.5% 7.5% to 9.5% 8% to 8.5% 8% to 8.5%
rates(1) ) growth growth growth growth
--------------- ---------------- ---------------- ------------ ------------
Operating cash
flow $1,030 $880 $315 to $320 $315 to $320
--------------- ---------------- ---------------- ------------ ------------
Free cash
flow(2) $1,000 $850(4) $310 to $315 $310 to $315
--------------- ---------------- ---------------- ------------ ------------
Revenue $2,675 to $2,940 $2,540 to $2,805 $710 to $770 $685 to $745
--------------- ---------------- ---------------- ------------ ------------
Earnings per $4.42 to $6.93 $6.94 to $9.66 $1.25 to $4.09 to
share $1.87 $4.74
--------------- ---------------- ---------------- ------------ ------------
Non-GAAP $6.69 to $9.15 $6.36 to $8.84 $1.93 to $1.87 to
earnings per $2.54 $2.47
share(2)
--------------- ---------------- ---------------- ------------ ------------
(1) On a constant currency basis, using our FY'26 Plan foreign exchange rates
(rates as of September 30, 2025) for all periods.
(2) Refer to the GAAP to non-GAAP reconciliation tables on page 2.
(3) Updated guidance for cash flow, revenue, and EPS reflects the effect of
the Kepware and ThingWorx divestiture. FY'26 cash flow guidance includes
approximately $150 million of divestiture-related outflows, which are not
expected to recur in future years. This amount is comprised of
approximately $40 million of divestiture-related costs and approximately
$110 million of divestiture-related cash taxes. Q2'26 cash flow guidance
includes approximately $5 million of divestiture-related costs. FY'26 and
Q2'26 GAAP EPS guidance includes approximately $145 million and $135
million, respectively, of divestiture-related expenses and taxes. FY'26
and Q2'26 GAAP EPS guidance also includes a $464 million gain on the sale
of our Kepware and ThingWorx businesses.
(4) FY'26 free cash flow guidance includes approximately $20 million of
capital expenditures which are not expected to recur in future years,
related to moving a major R&D center to a new office.
Reconciliation of FY'26 Operating Cash Flow Guidance Including Kepware and ThingWorx to FY'26 Operating Cash Flow Guidance Excluding Kepware and ThingWorx
FY'26 Operating
Cash Flow
$ in millions Guidance
Previous FY'26 operating cash flow guidance including Kepware
and ThingWorx $1,030
------------------------------------------------------------- ---------------
Estimated operating cash flow impact related to absence of
Kepware and ThingWorx post-divestiture, largely offset by
estimated net proceeds from divestiture-related Transition
Services Agreement $0
------------------------------------------------------------- ---------------
Estimated divestiture-related costs, which are not expected
to recur in future years ($40)
------------------------------------------------------------- ---------------
Estimated divestiture-related cash taxes, which are not
expected to recur in future years ($110)
------------------------------------------------------------- ---------------
Updated FY'26 operating cash flow guidance excluding Kepware
and ThingWorx $880
------------------------------------------------------------- ---------------
Reconciliation of FY'26 Free Cash Flow Guidance Including Kepware and ThingWorx to FY'26 Free Cash Flow Guidance Excluding Kepware and ThingWorx
FY'26 Free Cash
$ in millions Flow Guidance
Previous FY'26 free cash flow guidance including Kepware and
ThingWorx $1,000
------------------------------------------------------------- ---------------
Estimated free cash flow impact related to absence of
Kepware and ThingWorx post-divestiture, largely offset by
estimated net proceeds from divestiture-related Transition
Services Agreement $0
------------------------------------------------------------- ---------------
Estimated divestiture-related costs, which are not expected
to recur in future years ($40)
------------------------------------------------------------- ---------------
Estimated divestiture-related cash taxes, which are not
expected to recur in future years ($110)
------------------------------------------------------------- ---------------
Updated FY'26 free cash flow guidance excluding Kepware and
ThingWorx $850(1)
------------------------------------------------------------- ---------------
(1) Refer to the Reconciliation of Operating Cash Flow Guidance to Free Cash
Flow Guidance table below.
Reconciliation of Operating Cash Flow Guidance to Free Cash Flow Guidance
FY'26 Q2'26
$ in millions Guidance Guidance
Operating cash flow $880 $315 to $320
---------------------- --------- ------------
Capital expenditures $30 $5
---------------------- --------- ------------
Free cash flow $850 $310 to $315
---------------------- --------- ------------
Reconciliation of EPS Guidance to Non-GAAP EPS Guidance
FY'26 Q2'26
Guidance Guidance
-------------- --------------
Earnings per share $6.94 to $9.66 $4.09 to $4.74
--------------------------------------------- -------------- --------------
Stock-based compensation $2.22 to $1.97 $0.65 to $0.58
--------------------------------------------- -------------- --------------
Amortization of acquired intangible assets $0.68 $0.17
--------------------------------------------- -------------- --------------
Acquisition and transaction-related charges $0.30 $0.21
--------------------------------------------- -------------- --------------
Non-operating charges (credits), net ($3.97) ($3.93)
--------------------------------------------- -------------- --------------
Income tax adjustments $0.19 to $0.20 $0.68 to $0.70
--------------------------------------------- -------------- --------------
Non-GAAP Earnings per share $6.36 to $8.84 $1.87 to $2.47
--------------------------------------------- -------------- --------------
FY'26 financial guidance includes the following assumptions:
-- We provide ARR guidance on a constant currency basis, using our FY'26
Plan foreign exchange rates (rates as of September 30, 2025) for all
periods.
-- We expect churn to remain low.
-- For cash flow, due to largely similar invoicing seasonality and timing of
expenses, and consistent with the past 5 years, we expect the majority of
our collections to occur in the first half of our fiscal year and for
fiscal Q4 to be our lowest cash flow generation quarter.
-- FY'26 GAAP operating expenses are expected to increase approximately 3%,
primarily due to the divestiture-related expenses. Apart from the
divestiture-related expenses, GAAP and non-GAAP operating expenses are
expected to be relatively flat, as investments to drive future growth are
offset by net proceeds from the divestiture-related Transition Services
Agreement and lower operating expenses due to divested costs.
-- We expect the absence of FY'26 Kepware and ThingWorx cash flow
post-divestiture to be largely offset by FY'26 net proceeds from the
divestiture-related Transition Services Agreement.
-- Capital expenditures are expected to be approximately $30 million, with
approximately $20 million of capital expenditures in FY'26 that are not
expected to recur in future years, related to moving a major R&D center
to a new office.
-- Cash interest payments are expected to be approximately $50 million to
$70 million.
-- Cash tax payments are expected to be approximately $240 million to $260
million, of which approximately $110 million is related to the Kepware
and ThingWorx transaction and not expected to recur in future years.
-- GAAP and non-GAAP tax rates are expected to be approximately 20% to 25%.
-- GAAP P&L results are expected to include the items below, netting to a
gain of approximately $90 million to $120 million, as well as their
related tax effects:
-- approximately $465 million of non-operating credits, primarily
related to a gain on the sale of our Kepware and ThingWorx
businesses, partially offset by
-- approximately $230 million to $260 million related to stock-based
compensation,
-- approximately $80 million related to amortization of acquired
intangible assets, and
-- approximately $35 million related to acquisition and
transaction-related charges, of which approximately $25 million is
expected in Q2'26.
-- In Q2'26, we intend to repurchase approximately $250 million of common
stock. In addition, we will use the net after-tax proceeds from
the Kepware and ThingWorx transaction for incremental share repurchases
and intend to enter into a $375 million accelerated share repurchase
agreement in Q2'26, with final settlement expected in Q3'26. In Q2'26, we
expect a decrease in fully diluted shares to approximately 118 million
shares, compared to 121 million shares in Q2'25. In addition, in the
second half of FY'26, we intend to repurchase between $150 million and
$250 million of common stock per quarter. In total, we expect to
repurchase approximately $1.125 billion to $1.325 billion of our shares
in FY'26.
PTC Investor Update Call
PTC will host a conference call to discuss the divestiture and updated guidance at 5:00 pm ET on Monday, March 16, 2026. To participate in the live conference call, dial (888) 596-4144 or (646) 968-2525, provide the passcode 9277628, and press # or log in to the webcast, available on PTC's Investor Relations website. A replay will also be available.
Important Information About Our Operating and Non-GAAP Financial Measures
Non-GAAP Financial Measures
We provide supplemental non-GAAP financial measures to our financial results. We use these non-GAAP financial measures, and we believe that they assist our investors, to make period-to-period comparisons of our operating performance because they provide a view of our operating results without items that are not, in our view, indicative of our operating results. These non-GAAP financial measures should not be construed as an alternative to GAAP results as the items excluded from the non-GAAP financial measures often have a material impact on our operating results, certain of those items are recurring, and others often recur. Management uses, and investors should consider, our non-GAAP financial measures only in conjunction with our GAAP results.
Non-GAAP operating expense, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income and non-GAAP EPS exclude the effect of the following items: stock-based compensation; amortization of acquired intangible assets; acquisition and transaction-related charges included in general and administrative expenses; impairment and other charges (credits), net; non-operating charges and credits shown in the reconciliation provided; and income tax adjustments. Additional information about the items we exclude from our non-GAAP financial measures and the reasons we exclude them can be found in "Non-GAAP Financial Measures" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.
Free Cash Flow: We provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings and to evaluate our performance against our announced long-term goals and intent to return excess cash to shareholders via stock repurchases. Free cash flow is cash provided by (used in) operations net of capital expenditures. Free cash flow is not a measure of cash available for discretionary expenditures.
Constant Currency $(CC)$: We present CC information to provide a framework for assessing how our underlying business performed excluding the effects of foreign currency exchange rate fluctuations. To present CC information, FY'26 and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the foreign exchange rate as of September 30, 2025, rather than the actual exchange rates in effect during that period.
Operating Measure
ARR: ARR (Annual Run Rate) represents the annualized value of our portfolio of active subscription software, SaaS, hosting, and support contracts as of the end of the reporting period. We calculate ARR as follows:
-- We consider a contract to be active when the product or service
contractual term commences (the "start date") until the right to use the
product or service ends (the "expiration date"). Even if the contract
with the customer is executed before the start date, the contract will
not count toward ARR until the customer right to receive the benefit of
the products or services has commenced.
-- For contracts that include annual values that change over time, we
include in ARR only the annualized value of components of the contract
that are considered active as of the date of the ARR calculation. We do
not include any future committed increases in the contract value as of
the date of the ARR calculation.
-- As ARR includes only contracts that are active at the end of the
reporting period, ARR does not reflect assumptions or estimates regarding
future contract renewals or non-renewals.
-- Active contracts are annualized by dividing the total active contract
value by the contract duration in days (expiration date minus start date),
then multiplying that by 365 days (or 366 days for leap years).
We believe ARR is a valuable operating measure to assess the health of a subscription business because it is aligned with the amount that we invoice the customer on an annual basis. We generally invoice customers annually for the current year of the contract. A customer with a one-year contract will typically be invoiced for the total value of the contract at the beginning of the contractual term, while a customer with a multi-year contract will be invoiced for each annual period at the beginning of each year of the contract.
ARR increases by the annualized value of active contracts that commence in a reporting period and decreases by the annualized value of contracts that expire in the reporting period.
As ARR is not annualized recurring revenue, it is not calculated based on recognized or unearned revenue and is not affected by variability in the timing of revenue under ASC 606, particularly for on-premises license subscriptions where a substantial portion of the total value of the contract is recognized as revenue at a point in time upon the later of when the software is made available, or the subscription term commences.
ARR should be viewed independently of recognized and unearned revenue and is not intended to be combined with, or to replace, either of those items. Investors should consider our ARR operating measure only in conjunction with our GAAP financial results.
Forward-Looking Statements
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