PTC has completed its acquisition of Arena Solutions, the industry's leading software as a service (SaaS) product lifecycle management (PLM) solution. The combination of Arena Solutions and Onshape, which PTC acquired in 2019, establishes PTC as the leading provider of pure SaaS solutions for the product development market and broadly extends PTC's presence in the attractive mid-market, where SaaS solutions are becoming the standard.
"Together, Arena Solutions and Onshape will provide a powerful pure SaaS CAD and PLM solution that is positioned to capture the rapidly emerging shift toward SaaS for product design, development, and realization," said Jim Heppelmann, President and CEO, PTC. "The combined solution will allow manufacturers to improve collaboration and accelerate innovation in the 'new normal' created by the global pandemic. With our Creo® and Windchill® solutions showing strong momentum in the traditional CAD and PLM market, and now the Arena™ and Onshape® solutions leading the way in SaaS, PTC is well positioned to lead the product development market today and into the future."
According to independent industry analyst firm Gartner, the overall SaaS market is poised to surpass $120 billion in 2021. As the product development market responds to the COVID-19 pandemic, early adopters have realized the impact of key SaaS benefits especially as they relate to digital transformation.
Concurrent with the closing of the Arena Solutions acquisition, PTC has expanded its SaaS business unit, which now includes Arena, Onshape, and PTC's market-leading Vuforia® augmented reality technology. The expanded business unit will be led by long-time PTC global sales leader Mike DiTullio, reporting directly to PTC's CEO, Jim Heppelmann. Jamie Pappas, a 25-year PTC sales veteran, has been elevated to succeed DiTullio as head of global sales. Pappas has led regional sales in Asia, Europe and, most recently, North America, driving consistently strong performance in each role.
"The expansion of our SaaS business unit will allow us to focus on integrating the Arena team into PTC and leveraging the tremendous talent and expertise we have across our SaaS portfolio," continued Heppelmann. "Mike DiTullio has demonstrated his ability to align organizations to drive growth, and I am confident that in this new role he can help us capitalize on our SaaS technology leadership position. Jamie Pappas is an accomplished veteran sales leader within PTC, and I am equally confident in a smooth and seamless transition as he assumes his new role. PTC is fortunate to have such a strong bench of sales and business leadership."
Arena Solutions ended calendar year 2020 with approximately $50 million in annualized recurring revenue, reflecting double-digit growth over 2019. PTC continues to expect that the transaction will be neutral to PTC's FY'21 cash flow from operations target of $365 million and free cash flow target of $340 million (which reflects the deduction of approximately $25 million of capital expenditures from cash flow from operations) and accretive to FY'22 and beyond. PTC expects ARR growth for its first quarter of fiscal 2021 ended December 31, 2020 to be near the high end of guidance. Management plans to update investor guidance as part of its fiscal first quarter earnings release on January 27, 2021.
