PTC
$123.52
Ptc
($.32)
(.26%)
Earnings Details
3rd Quarter June 2021
Wednesday, July 28, 2021 4:01:00 PM
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Summary

PTC Raises Guidance

Ptc (PTC) reported 3rd Quarter June 2021 earnings of $0.54 per share on revenue of $435.7 million. The consensus earnings estimate was $0.33 per share on revenue of $412.6 million. Revenue grew 23.9% on a year-over-year basis.

The company said it expects fiscal 2021 non-GAAP earnings of $3.35 to $3.60 per share on revenue of $1.733 billion to $1.763 billion. The company's previous guidance was earnings of $3.18 to $3.39 per share on revenue of $1.71 billion to $1.74 billion and the current consensus earnings estimate is $3.33 per share on revenue of $1.73 billion for the year ending September 30, 2021.

PTC Inc develops software solutions and delivers related services that help companies design products, manage product information and improve their product development and services processes.

Results
Reported Earnings
$0.54
Earnings Whisper
-
Consensus Estimate
$0.33
Reported Revenue
$435.7 Mil
Revenue Estimate
$412.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

PTC Announces Fiscal Third Quarter 2021 Results

BOSTON, July 28, 2021 /PRNewswire/ -- PTC (NASDAQ: PTC) today reported financial results for its fiscal third quarter ended June 30, 2021

"Our performance in the third quarter and year to date reflects continued strong execution.  We again delivered double-digit top line growth, leading to solid operating and free cash flow results," said James Heppelmann, President and CEO, PTC.

"This performance reflects how PTC's 'Digital Transforms Physical' strategy is resonating with customers and driving demand for our Core CAD and PLM solutions as well as our new Onshape and Arena SaaS offerings," said Heppelmann. "Our breakthrough technologies across the product portfolio are gaining mindshare as customers are realizing the value these innovative solutions can bring to their organizations."

"The SaaS delivery model is just beginning to disrupt the industrial technology market and I am excited that PTC has carved out a leadership position at the forefront of that paradigm shift," continued Heppelmann. "By delivering CAD, PLM, IOT, and AR technologies in the cloud, customers can work faster, reduce total cost of ownership, be more efficient and increase the return on their investment over the long-term."

Third quarter 2021 highlights1
Key operating and financial highlights are set forth below. For additional details, please refer to the Q3'21 earnings presentation and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com.

  • ARR was $1.42 billion in Q3'21, representing growth of 18%, or 15% in constant currency, compared to Q3'20, in line with our guidance. Organic growth was 14% in Q3'21, or 11% in constant currency, compared to Q3'20.
  • Revenue was $436 million in Q3'21 compared to $352 million in Q3'20, growth of 24%, or 19% in constant currency, driven primarily by strong execution, as well as the impact of up front license revenue recognition under ASC 606, and a modest contribution from Arena.
  • Cash flow from operations was $88 million and free cash flow was $85 million in Q3'21, in line with our expectations, compared to Q3'20 cash flow from operations of $105 million and free cash flow of $99 million.
  • Operating margin was 17% in Q3'21, compared to 18% in Q3'20. Non-GAAP operating margin in Q3'21 was 31%, compared to 29% in Q3'20.
  • Total cash and cash equivalents as of the end of Q3'21 was $366 million; gross debt was $1.5 billion. We repaid $30 million on our revolver in Q3'21.

1 We include operating and non-GAAP financial measures in our operational highlights. The detailed definitions of these items and reconciliations of Non-GAAP financial measures to comparable GAAP measures are included below and in the reconciliation tables at the end of this press release.

Fiscal 2021 Guidance

"Year to date, PTC has delivered strong ARR, Revenue, EPS, Operating Cash Flow and Free Cash Flow, consistent with our guidance throughout the year. We remain on track to deliver against our full year guidance on a constant currency basis," said Kristian Talvitie, EVP and CFO, PTC.

Our FY'21 financial guidance includes the assumptions below, which remain unchanged other than updating currency impact on ARR:

  • Our current guidance assumes a ~60 bps positive currency effect in FY'21.
  • Macroeconomic conditions related to the COVID-19 crisis improve in the second-half of FY'21.
  • Organic ARR growth of 10% to 12% on a constant currency basis and Arena contributes ~400 basis points of ARR growth.
  • FY'21 ARR growth is inclusive of a ~2% headwind from lower-than-expected Deferred ARR exiting FY'20, primarily due to lower bookings in FY'20 reflecting the effect of the COVID-19 pandemic.
  • ARR YoY growth rates, on an organic constant currency basis, are expected to be approximately linear each quarter throughout FY'21.
  • Organic churn improves ~100 bps YoY.
  • GAAP tax rate is expected to be ~20%, including a benefit of $42 million related to the tax effects for Arena Solutions and an approximately $35 million tax reserve related to a tax matter in a non-US jurisdiction. Non-GAAP tax rate is expected to be ~19%.

 





In millions except per share amounts

Previous Guidance

Revised Guidance

YoY

ARR

$1,445 - $1,470

$1,453 - $1,478

14% - 16%

Cash from Operations (1)

~$365


~55%

Free Cash Flow (1)

~$340


~60%

Revenue

$1,710 - $1,740

$1,733 - $1,763

19% - 21%

GAAP Operating Margin (2)

15% - 17%

17% – 19%

300 bps – 500 bps

Non-GAAP Operating Margin (2)

31% -32%

32% - 33%

300 bps – 400 bps

GAAP EPS (2)

$1.38 - $1.59

$1.59 - $1.84

41% - 63%

Non-GAAP EPS (2)

$3.18 - $3.39

$3.35 - $3.60

31% - 40%



(1)

Cash from operations and free cash flow include ~$15 million of restructuring payments, ~$15 million of acquisition-related payments, ~$18 million of un-forecasted payments related to the prior period tax exposure from a non-U.S. tax dispute, and ~$5 million of incremental interest related to the Arena acquisition; free cash flow is net of capital expenditures of ~$25 million.

(2)

The FY'21 non-GAAP guidance excludes the estimated items outlined in the table below, as well as any additional tax effects and discrete tax items (which are not known or reflected). Our FY'21 non-GAAP guidance also excludes tax expense of ~$35 million related to a non-U.S. prior period tax exposure related to foreign withholding taxes and a tax benefit of ~$42 million related to Arena Solutions. Our FY'21 guidance and the table below do not reflect any anticipated gains related to our investment in Matterport, Inc.

 

In millions



FY'21

Acquisition-related charges



$15

Intangible asset amortization expense



$59

Stock-based compensation expense



$180

Restructuring and other charges



$1

Total Estimated Pre-Tax GAAP adjustments



$255

PTC's Fiscal Third Quarter 2021 Results Conference Call

The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, July 28, 2021.

To participate in the live conference call, dial (833) 670-0719 or (236) 714-2933 and provide the passcode 4499023, or log in to the webcast, available on PTC's Investor Relations website. A replay will also be available.

Important Disclosures

Important Information About Our Non-GAAP Financial Measures 
PTC provides supplemental non-GAAP financial measures to its 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-related and other transactional charges included in general and administrative expenses; restructuring and other charges, net; certain non-operating charges; 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" on page 25 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020. In the first nine months of FY'21, we incurred tax expense related to a South Korean tax exposure which is excluded from our non-GAAP financial measures as it is related to prior periods and not included in management's view of Q3'21 results for comparative purposes. We also incurred a tax benefit related to the release of a valuation allowance as a result of the Arena acquisition. As the non-GAAP tax provision is calculated assuming that there is no valuation allowance, this benefit has been excluded from our non-GAAP financial measures.

Free Cash Flow - PTC provides 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 approximately 50% of our free cash flow to shareholders via stock repurchases. Free cash flow is net 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 Change Metric - We present CC information to provide a framework for assessing how our underlying business performed excluding the effects of foreign currency rate fluctuations. To present CC information, current 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, 2020, rather than the actual exchange rates in effect during that period. 

Operating Measures
ARR - To help investors understand and assess the performance of our business as a SaaS and on-premise subscription company we provide an ARR (Annual Run Rate) operating measure.  ARR represents the annualized value of our portfolio of active subscription software, cloud, SaaS, and support contracts as of the end of the reporting period.  ARR includes orders placed under our Strategic Alliance Agreement with Rockwell Automation, including orders placed to satisfy contractual minimum commitments. 

We believe ARR is a valuable operating metric to measure the health of a subscription business because it captures expected subscription and support cash generation from customers.

Deferred ARR (DARR) - DARR represents the incremental annualized exit value of customer contracts that are committed as of the end of the reporting period to start or increase in value in a future period.

Because these measures represent the annualized value of customer contracts as of a point in time, they do not represent revenue for any particular period or remaining revenue that will be recognized in future periods.

Bookings - We define Bookings as the annualized value, based on the final month of the contract, of new renewable software contracts committed to in a period. For contracts with terms of less than one year that are not associated with an existing contract, the booking is equal to the total contract value. 

Bookings can flow into ARR or DARR, depending on the start date of the contract, or in the case of ramp deals, the start dates of each subsequent tranche of the ramp.

Forward-Looking Statements
Statements in this press release that are not historic facts, including statements about our future financial and growth expectations and targets, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include: the macroeconomic and/or global manufacturing climates may not improve when or as we expect, or may deteriorate, due to, among other factors, the COVID-19 pandemic, which could cause customers to delay or reduce purchases of new software, reduce the number of subscriptions they carry, or delay payments to us, all of which would adversely affect ARR and our financial results, including cash flow; our businesses, including our SaaS businesses, may not expand and/or generate the revenue or ARR we expect if customers are slower to adopt our technologies than we expect or if they adopt competing technologies; foreign exchange rates may differ materially from those we expect; and orders associated with minimum purchase commitments under our Strategic Alliance Agreement with Rockwell Automation may not result in subscription contracts sold through to end-user customers, which could cause the ARR associated with those orders to churn.  In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including the geographic mix of our revenue, expenses, and profits. Other risks and uncertainties that could cause actual results to differ materially from those projected are detailed from time to time in reports we file with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

About PTC (NASDAQ: PTC)
PTC unleashes industrial innovation with award-winning, market-proven solutions that enable companies to differentiate their products and services, improve operational excellence, and increase workforce productivity. With PTC and its partner ecosystem manufacturers can capitalize on the promise of today's new technology to drive digital transformation.

PTC.com           @PTC           Blogs

PTC Investor Relations Contact              

Emily Walt
Senior Director, Investor Relations
ewalt@ptc.com

PTC Inc.


UNAUDITED CONSOLIDATED STATEMENTS OF INCOME


(in thousands, except per share data)









































Three Months Ended



Nine Months Ended





June 30,



June 27,



June 30,



June 27,





2021



2020



2021



2020




















Revenue:
















Recurring revenue

$

387,175



$

310,621



$

1,186,978



$

931,852


Perpetual license


7,259




6,773




22,644




23,988


Professional services


41,234




34,327




116,882




111,594


Total revenue (1)


435,668




351,721




1,326,504




1,067,434




















Cost of revenue (2)


95,077




79,224




271,355




249,656




















Gross margin


340,591




272,497




1,055,149




817,778




















Operating expenses:
















Sales and marketing (2)


134,412




104,594




388,315




319,636


Research and development (2)


78,134




61,429




221,514




186,691


General and administrative (2)


47,084




35,709




157,417




113,895


Amortization of acquired intangible assets


7,511




7,302




21,708




21,367


Restructuring and other charges, net


(132)




62




584




32,338


Total operating expenses


267,009




209,096




789,538




673,927




















Operating income


73,582




63,401




265,611




143,851


Other expense, net


(15,113)




(18,885)




(43,378)




(64,526)


Income before income taxes


58,469




44,516




222,233




79,325


Provision for income taxes


7,266




9,838




38,253




2,036


Net income

$

51,203



$

34,678



$

183,980



$

77,289




















Earnings per share:
















Basic

$

0.44



$

0.30



$

1.58



$

0.67


Weighted average shares outstanding


116,934




115,759




116,702




115,521




















Diluted

$

0.43



$

0.30



$

1.56



$

0.67


Weighted average shares outstanding


118,611




116,229




118,181




115,981







































(1)

See supplemental financial data for revenue by license, support, and professional services. FY'21 recurring revenue includes a $6.9 million adjustment related to the fair value of acquired deferred revenue.



(2)

See supplemental financial data for additional information about stock-based compensation.


 

PTC Inc.


SUPPLEMENTAL FINANCIAL DATA FOR REVENUE AND STOCK-BASED COMPENSATION


(in thousands, except per share data)






































Revenue by license, support and services is as follows:



















Three Months Ended



Nine Months Ended





June 30,



June 27,



June 30,



June 27,





2021



2020



2021



2020


License revenue (1)

$

163,583



$

118,248



$

538,769



$

369,285


Support and cloud services revenue (2)


230,851




199,146




670,853




586,555


Professional services revenue


41,234




34,327




116,882




111,594


Total revenue (2)

$

435,668



$

351,721



$

1,326,504



$

1,067,434





















(1)

License revenue includes the portion of subscription revenue allocated to license.



(2)

FY'21 support and cloud services revenue includes a $6.9 million adjustment related to the fair value of acquired deferred revenue.




















The amounts in the income statement include stock-based compensation as follows:































Three Months Ended



Nine Months Ended





June 30,



June 27,



June 30,



June 27,





2021



2020



2021



2020


Cost of revenue

$

5,094



$

3,165



$

14,034



$

9,208


Sales and marketing


14,229




9,407




42,533




24,005


Research and development


8,514




5,583




24,878




17,280


General and administrative


15,231




7,030




52,451




23,112


Total stock-based compensation

$

43,068



$

25,185



$

133,896



$

73,605


 

PTC Inc.


NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)


(in thousands, except per share data)























Three Months Ended



Nine Months Ended





June 30,



June 27,



June 30,



June 27,





2021



2020



2021



2020




















GAAP gross margin

$

340,591



$

272,497



$

1,055,149



$

817,778


Stock-based compensation


5,094




3,165




14,034




9,208


Amortization of acquired intangible assets included in cost of revenue


8,260




6,857




21,644




20,535


Non-GAAP gross margin

$

353,945



$

282,519



$

1,090,827



$

847,521




















GAAP operating income

$

73,582



$

63,401



$

265,611



$

143,851


Stock-based compensation


43,068




25,185




133,896




73,605


Amortization of acquired intangible assets


15,771




14,159




43,352




41,902


Acquisition-related and other transactional charges


618




674




14,844




8,064


Restructuring and other charges, net


(132)




62




584




32,338


Non-GAAP operating income (1)

$

132,907



$

103,481



$

458,287



$

299,760




















GAAP net income

$

51,203



$

34,678



$

183,980



$

77,289


Stock-based compensation


43,068




25,185




133,896




73,605


Amortization of acquired intangible assets


15,771




14,159




43,352




41,902


Acquisition-related and other transactional charges


618




674




14,844




8,064


Restructuring and other charges, net


(132)




62




584




32,338


Non-operating charges (2)


-




3,451




-




18,451


Income tax adjustments (3)


(12,513)




(6,167)




(37,065)




(44,988)


Non-GAAP net income

$

98,015



$

72,042



$

339,591



$

206,661




















GAAP diluted earnings per share

$

0.43



$

0.30



$

1.56



$

0.67


Stock-based compensation


0.36




0.22




1.13




0.63


Amortization of acquired intangibles


0.13




0.12




0.37




0.36


Acquisition-related and other transactional charges


0.01




0.01




0.13




0.07


Restructuring and other charges, net


-




-




-




0.28


Non-operating charges


-




0.03




-




0.16


Income tax adjustments


(0.11)




(0.05)




(0.31)




(0.39)


Non-GAAP diluted earnings per share

$

0.83



$

0.62



$

2.87



$

1.78





















(1)

Operating margin impact of non-GAAP adjustments:









Three Months Ended



Nine Months Ended





June 30,



June 27,



June 30,



June 27,





2021



2020



2021



2020



GAAP operating margin


16.9

%



18.0

%



20.0

%



13.5

%


Stock-based compensation


9.9

%



7.2

%



10.1

%



6.9

%


Amortization of acquired intangibles


3.6

%



4.0

%



3.3

%



3.9

%


Acquisition-related and other transactional charges


0.1

%



0.2

%



1.1

%



0.8

%


Restructuring and other charges, net


0.0

%



0.0

%



0.0

%



3.0

%


Non-GAAP operating margin


30.5

%



29.4

%



34.5

%



28.1

%




















(2)

We recognized $15 million of expense in the nine months ended June 27, 2020 related to penalties for the early redemption of the 6.000% Senior Notes due in 2024 and wrote off approximately $3 million of related debt issuance costs in the third quarter of 2020.



(3)

We have recorded a full valuation allowance against our U.S. net deferred tax assets. As we are profitable on a non-GAAP basis, the 2021 and 2020 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. In the nine months ended June 30, 2021 and June 27, 2020, our GAAP results included benefits of $42.3 million and $21.2 million, respectively, related to the release of a valuation allowance as a result of the Arena and Onshape acquisitions. As the non-GAAP tax provision is calculated assuming that there is no valuation allowance, these benefits have been excluded. Income tax adjustments reflect the tax effects of non-GAAP adjustments which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments listed above. Additionally, our non-GAAP results for the first nine months of FY'21 exclude tax expense of $34.8 million related to a non-U.S. prior period tax exposure, primarily related to foreign withholding taxes.


 

PTC Inc.


UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands)



















June 30,



September 30,



2021



2020










ASSETS
















Cash and cash equivalents

$

365,756



$

275,458


Marketable securities


-




59,099


Accounts receivable, net


432,980




415,221


Property and equipment, net


93,659




101,499


Goodwill and acquired intangible assets, net


2,591,995




1,863,356


Lease assets, net


147,431




149,933


Other assets


574,398




518,172










Total assets

$

4,206,219



$

3,382,738










LIABILITIES AND STOCKHOLDERS' EQUITY
















Deferred revenue

$

473,613



$

426,465


Debt, net of deferred issuance costs


1,478,927




1,005,314


Lease obligations


203,133




215,023


Other liabilities


325,588




297,688


Stockholders' equity


1,724,958




1,438,248










Total liabilities and stockholders' equity

$

4,206,219



$

3,382,738


 

PTC Inc.


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)



























































Three Months Ended



Nine Months Ended





June 30,



June 27,



June 30,



June 27,





2021



2020



2021



2020




















Cash flows from operating activities:
















Net income

$

51,203



$

34,678



$

183,980



$

77,289


Stock-based compensation


43,068




25,185




133,896




73,605


Depreciation and amortization


22,501




20,484




62,670




60,677


Amortization of right-of-use lease assets


9,075




10,324




28,031




29,467


Accounts receivable


5,744




34,475




(4,110)




54,662


Accounts payable and accruals


16,851




3,179




15,955




5,133


Deferred revenue


(21,477)




(14,036)




30,733




3,357


Income taxes and other


(38,931)




(9,784)




(127,667)




(104,356)


Net cash provided by operating activities


88,034




104,505




323,488




199,834


















Capital expenditures


(3,420)




(5,169)




(11,662)




(15,412)


Acquisition of businesses, net of cash acquired (1)


(581)




-




(717,779)




(468,520)


Purchase of intangible assets


-




(11,050)




(550)




(11,050)


Borrowings (payments) on debt, net


(30,000)




(510,125)




472,000




464,875


Net proceeds associated with issuance of common stock


-




-




10,484




8,980


Payments of withholding taxes in connection with vesting of stock-based awards


(14,973)




(9,661)




(42,215)




(33,232)


Debt issuance costs


-




(817)




-




(17,083)


Debt early redemption premium


-




(15,000)




-




(15,000)


Net proceeds from (purchases of) marketable securities (2)


-




(115)




58,469




(295)


Other financing & investing activities


(488)




(3,929)




(3,570)




(1,729)


Foreign exchange impact on cash


1,103




1,613




1,646




(4,127)


















Net change in cash, cash equivalents, and restricted cash


39,675




(449,748)




90,311




107,241


Cash, cash equivalents, and restricted cash, beginning of period


326,596




827,678




275,960




270,689


Cash, cash equivalents, and restricted cash, end of period

$

366,271



$

377,930



$

366,271



$

377,930



































Three Months Ended



Nine Months Ended



June 30,



June 27,



June 30,



June 27,



2021



2020



2021



2020


Cash provided by operating activities

$

88,034



$

104,505



$

323,488



$

199,834


Capital expenditures


(3,420)




(5,169)




(11,662)




(15,412)


Free cash flow (3)

$

84,614



$

99,336



$

311,826



$

184,422








(1)

In the second quarter of 2021, we acquired Arena for approximately $715 million, net of cash acquired. In the first quarter of 2020, we acquired Onshape for $469 million, net of cash acquired.


(2)

In the first quarter of 2021, we sold all of our available-for-sale securities.


(3)

Free cash flow includes $2.0 million and $13.7 million of restructuring payments in the three and nine months ended June 30, 2021, respectively, compared with $12.5 million and $33.8 million in the three and nine months ended June 27, 2020.  Free cash flow includes $3.8 million and $14.8 million of acquisition-related payments for the three and nine months ended June 30, 2021, respectively, compared with $0.2 million and $8.8 million in the three and nine months ended June 27, 2020. Free cash flow includes $17.0 million and $17.9 million in un-forecasted payments related to the prior period tax exposure from a non-U.S. tax dispute in the three and nine months ended June 30, 2021, respectively.




 

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SOURCE PTC Inc.