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PTC ANNOUNCES SECOND FISCAL QUARTER 2023 RESULTS

BOSTON, April 26, 2023 — (PRNewswire) — PTC (NASDAQ: PTC) today reported financial results for its second fiscal quarter ended March 31, 2023.

"In our second fiscal quarter, we again delivered strong ARR and cash flow results that exceeded our guidance ranges. We reported ARR growth of 23%, organic ARR growth of 11%, and organic constant currency ARR growth of 13%. Our ServiceMax® and Codebeamer™ businesses added 13 points of ARR growth, taking constant currency ARR growth to 26%. In Q2, our cash from operations was $211 million, up 48% year over year, and our free cash flow was $207 million, up 48% year over year," said James Heppelmann, CEO, PTC.

"Our diverse product portfolio, now increasingly differentiated with the addition of ServiceMax, and our industry-leading SaaS capabilities align well to the manufacturing industry's push for digital transformation. Our subscription model and strong market position, coupled with solid execution, position PTC to deliver financial performance at peer-leading levels. We look forward to building on our momentum with customers and partners at our LiveWorx® conference in May in Boston, and invite investors to join us," concluded Heppelmann.

Second Quarter 2023 Highlights

Key operating and financial highlights are set forth below. For additional details, please refer to the Q2'23 earnings presentation and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com. The definitions of our operating and non-GAAP financial measures 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.

$ in millions

Q2'23

Q2'22

YoY Change


Q2'23
Guidance

ARR as reported

$1,882

$1,532

23 %



ARR at constant currency

$1,814

$1,440

26 %


$1,790 - $1,810

Organic ARR as reported

$1,696

$1,532

11 %



Organic ARR at constant currency

$1,631

$1,440

13 %



Cash from operations

$211

$142

48 %


~$205

Free cash flow

$207

$140

48 %


~$200

Revenue1

$542

$505

7 %



Operating margin1

23 %

32 %

-890 bps



Non-GAAP operating margin1

38 %

42 %

-410 bps



Earnings per share1

$0.532

$0.763

-30 %



Non-GAAP earnings per share1

$1.164

$1.394

-17%4



Total cash and cash equivalents

$320

$307

5 %



Gross debt

$2,5455

$1,275

100 %





1

In Q2'23, revenue was up 13% year over year on a constant currency basis. Revenue and, as a result, operating margin, operating profit, and earnings per share are impacted by revenue recognition under ASC 606.

2

In Q2'23, EPS included a $0.10 negative impact due to acquisition and transaction-related charges for the ServiceMax acquisition.

3

In Q2'22, EPS included a $0.38 negative impact due to a decline in value of a publicly traded equity investment. 

4

In Q2'23, non-GAAP EPS was down 17% year over year, primarily due to higher interest expense and lower non-GAAP operating income, partially offset by lower provision for income taxes.

5

Q2'23 gross debt includes a deferred acquisition payment related to ServiceMax of $620 million, which will be paid in October 2023.

Reconciliation of Q2'23 Cash from Operations to Free Cash Flow

In millions

Q2'23


Q2'23 Guidance

Cash from Operations

$211


~$205

  Capital expenditures

($4)


(~$5)

Free Cash Flow

$207


~$200

Fiscal 2023 and Q3'23 Guidance

"Our financial results in the first half of our fiscal year were solid, driven by the resilience of our business model, consistent execution, operational discipline, and the actions we have taken to align our investments with our growth opportunities. We believe we have set our financial guidance appropriately, balancing our momentum and outlook with macroeconomic uncertainties. Based on our performance in the first half of FY'23 and outlook for the second half of FY'23, we are narrowing our guidance range for constant currency ARR and raising our full year guidance for cash flow, while increasing investment in long-term growth opportunities," said Kristian Talvitie, CFO, PTC.

  $ in millions

FY'23 Previous
Guidance

FY'23
Guidance

FY'23 YoY Growth
Guidance

Q3'23
Guidance




  ARR at Constant Currency

$1,910 - $1,960

$1,925 - $1,950

22% - 24%

$1,845 - $1,855



  Cash from Operations

~$595

~$600

~38%

~$160



  Free Cash Flow

~$575

~$580

~39%

~$155



  Revenue

$2,070 - $2,150

$2,080 - $2,140

8% - 11%




Reconciliation of Cash from Operations Guidance to Free Cash Flow Guidance

  In millions

FY'23
Guidance

Q3'23
Guidance




  Cash from Operations

~$600

~$160



Capital expenditures

(~$20)

(~$5)



  Free Cash Flow

~$580

~$155



Our FY'23 and Q3'23 financial guidance includes the assumptions below:

PTC's Fiscal Second Quarter Results Conference Call

The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, April 26, 2023. To participate in the live conference call, dial (888) 330-2508 or (240) 789-2735 and provide the passcode 7328695, 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

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 and transaction-related charges included in general and administrative expenses; restructuring and other charges, net; certain non-operating charges and credits; 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, 2022.

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 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 rate fluctuations. To present CC information, FY'23 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, 2022, rather than the actual exchange rates in effect during that period. All discussion of FY'23 and comparative prior period ARR results (including FY'22 baseline amounts) are reflected using the foreign exchange rates as of September 30, 2022.

Operating Measures

ARR: ARR (Annual Run Rate) represents the annualized value of our portfolio of active subscription software, cloud, SaaS, and support contracts as of the end of the reporting period. We calculate ARR as follows:

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 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 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.

Organic Constant Currency ARR: We provide an organic constant currency ARR measure to help investors understand and assess the performance of our business without the distorting effects of ARR from acquisitions in the comparative period and foreign exchange rate fluctuations.

Churn: We provide a churn measure to enable investors to understand and assess our customer contract retention. Churn represents the difference between the ARR amount for all subscription software, cloud, SaaS, and support contracts ended within a reporting period and the ARR of renewal contracts started within a reporting period as of the end of the reporting period.

Forward-Looking Statements

Statements in this press release that are not historic facts, including statements about our future financial and growth expectations, guidance, and targets, and potential stock repurchases, 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 deteriorate sooner or to a greater extent than we expect due to, among other factors, the effects of the COVID-19 pandemic, including supply chain disruptions, increasing interest rates and inflation, volatile foreign exchange rates and the relative strength of the U.S. dollar, tightening of credit standards and availability, the effects of the Russia/Ukraine conflict, including the effect on energy supplies to Europe, and growing tensions with China, any of which could cause customers to delay or reduce purchases of new software, reduce the number of subscriptions they carry, or delay payments to us, which would adversely affect ARR and/or our financial results, including cash flow; our businesses, including our ServiceMax and SaaS businesses, may not expand and/or generate the revenue, cash flow, or ARR we expect if customers are slower to adopt those technologies than we expect or if they adopt competing technologies; our strategic initiatives and investments, including our accelerated investments in our transition to SaaS and the acquisition of ServiceMax, may not deliver the results when or as we expect; we may be unable to integrate the ServiceMax technology when or as we expect; we may be unable to generate sufficient operating cash flow to return 50% of free cash flow to shareholders, and other uses of cash or our credit facility limits could preclude such repurchases; and foreign exchange rates may differ materially from those we expect. 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 enables global manufacturers to realize double-digit impact with software solutions that enable them to accelerate product and service innovation, improve operational efficiency, and increase workforce productivity. In combination with an extensive partner network, PTC provides customers flexibility in how its technology can be deployed to drive digital transformation – on premises, in the cloud, or via its pure SaaS platform. At PTC, we don't just imagine a better world, we enable it.

PTC.com     @PTC     Blogs

PTC Investor Relations Contact                         
Matt Shimao
SVP, Investor Relations
Email Contact
Email Contact

 

 

PTC Inc.


UNAUDITED CONSOLIDATED STATEMENTS OF INCOME


(in thousands, except per share data)



























Three Months Ended



Six Months Ended



March 31,



March 31,



March 31,



March 31,



2023



2022



2023



2022














Revenue:












Recurring revenue

$

492,143



$

452,710



$

909,253



$

857,835


Perpetual license


8,921




9,540




22,165




18,008


Professional services


41,117




42,977




76,673




87,105


Total revenue(1)


542,181




505,227




1,008,091




962,948














Cost of revenue (2)


113,506




93,337




209,296




188,455














Gross margin


428,675




411,890




798,795




774,493














Operating expenses:












Sales and marketing (2)


129,207




116,408




247,590




241,884


Research and development (2)


100,349




81,935




188,526




162,469


General and administrative (2)


65,923




47,469




116,894




99,409


Amortization of acquired intangible assets


10,656




8,450




18,682




16,934


Restructuring and other charges (credits), net


1




(1,562)




(337)




32,429


Total operating expenses


306,136




252,700




571,355




553,125














Operating income


122,539




159,190




227,440




221,368


Other expense, net


(41,470)




(55,624)




(59,947)




(62,426)


Income before income taxes


81,069




103,566




167,493




158,942


Provision for income taxes


17,565




13,887




28,954




23,174


Net income

$

63,504



$

89,679



$

138,539



$

135,768














Earnings per share:












Basic

$

0.54



$

0.77



$

1.17



$

1.16


Weighted average shares outstanding


118,260




117,008




118,037




117,135














Diluted

$

0.53



$

0.76



$

1.17



$

1.15


Weighted average shares outstanding


119,041




117,811




118,912




118,162














(1) See supplemental financial data for revenue by license, support and cloud services, and professional services.


(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



Six Months Ended



March 31,



March 31,



March 31,



March 31,



2023



2022



2023



2022


License revenue (1)

$

196,993



$

218,375



$

369,691



$

387,483


Support and cloud services revenue


304,071




243,875




561,727




488,360


Professional services revenue


41,117




42,977




76,673




87,105


Total revenue

$

542,181



$

505,227



$

1,008,091



$

962,948














(1) License revenue includes the portion of subscription revenue allocated to license.














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



















Three Months Ended



Six Months Ended



March 31,



March 31,



March 31,



March 31,



2023



2022



2023



2022


Cost of revenue

$

5,746



$

4,264



$

9,821



$

10,236


Sales and marketing


12,845




11,446




25,041




24,527


Research and development


15,580




9,504




27,038




19,680


General and administrative


18,075




12,707




31,850




29,420


Total stock-based compensation

$

52,246



$

37,921



$

93,750



$

83,863


 

PTC Inc.


NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)


(in thousands, except per share data)















Three Months Ended



Six Months Ended



March 31,



March 31,



March 31,



March 31,



2023



2022



2023



2022














GAAP operating income

$

122,539



$

159,190



$

227,440



$

221,368


Stock-based compensation


52,246




37,921




93,750




83,863


Amortization of acquired intangible assets


20,490




14,371




34,658




29,348


Acquisition and transaction-related charges


11,883




3,903




17,689




4,953


Restructuring and other charges (credits), net


1




(1,562)




(337)




32,429


Non-GAAP operating income (1)

$

207,159



$

213,823



$

373,200



$

371,961














GAAP net income

$

63,504



$

89,679



$

138,539



$

135,768


Stock-based compensation


52,246




37,921




93,750




83,863


Amortization of acquired intangible assets


20,490




14,371




34,658




29,348


Acquisition and transaction-related charges


11,883




3,903




17,689




4,953


Restructuring and other charges (credits), net


1




(1,562)




(337)




32,429


Non-operating charges (2)


4,622




44,613




5,147




34,847


Income tax adjustments (3)


(14,943)




(25,444)




(33,676)




(44,669)


Non-GAAP net income

$

137,803



$

163,481



$

255,770



$

276,539














GAAP diluted earnings per share

$

0.53



$

0.76



$

1.17



$

1.15


Stock-based compensation


0.44




0.32




0.79




0.71


Amortization of acquired intangibles


0.17




0.12




0.29




0.25


Acquisition and transaction-related charges


0.10




0.03




0.15




0.04


Restructuring and other charges (credits), net


0.00




(0.01)




(0.00)




0.27


Non-operating charges (2)


0.04




0.38




0.04




0.29


Income tax adjustments (3)


(0.13)




(0.22)




(0.28)




(0.38)


Non-GAAP diluted earnings per share

$

1.16



$

1.39



$

2.15



$

2.34














(1) Operating margin impact of non-GAAP adjustments:













Three Months Ended



Six Months Ended



March 31,



March 31,



March 31,



March 31,



2023



2022



2023



2022


GAAP operating margin


22.6

%



31.5

%



22.6

%



23.0

%

Stock-based compensation


9.6

%



7.5

%



9.3

%



8.7

%

Amortization of acquired intangibles


3.8

%



2.8

%



3.4

%



3.0

%

Acquisition and transaction-related charges


2.2

%



0.8

%



1.8

%



0.5

%

Restructuring and other charges (credits), net


0.0

%



(0.3)

%



0.0

%



3.4

%

Non-GAAP operating margin


38.2

%



42.3

%



37.0

%



38.6

%













(2) In the three and six months ended March 31, 2023, we recognized $3.7 million and $4.2 million of financing charges for a
debt commitment agreement associated with our acquisition of ServiceMax, respectively.  In the three and six months ended
March 31, 2022, we recognized non-operating expenses of $44.6 million and $34.9 million due to the reduction in value of an
equity investment in a publicly-traded company, respectively.


(3) 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.


 

PTC Inc.


UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands)















March 31,



September 30,



2023



2022








ASSETS












Cash and cash equivalents

$

320,477



$

272,182


Accounts receivable, net


643,017




636,556


Property and equipment, net


92,003




98,101


Goodwill and acquired intangible assets, net


4,348,262




2,736,372


Lease assets, net


150,327




137,780


Other assets


745,534




806,277








Total assets

$

6,299,620



$

4,687,268








LIABILITIES AND STOCKHOLDERS' EQUITY












Deferred revenue

$

671,404



$

520,333


Debt, net of deferred issuance costs


1,917,703




1,350,628


Deferred acquisition payments (1)


620,040




-


Lease obligations


201,627




189,575


Other liabilities


370,312




330,698


Stockholders' equity


2,518,534




2,296,034








Total liabilities and stockholders' equity

$

6,299,620



$

4,687,268








(1) Deferred acquisition payments represent the fair value of the $650 million payment to be made in Q1'24 associated with
the ServiceMax, Inc. acquisition.


 

PTC Inc.


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)







































Three Months Ended



Six Months Ended



March 31,



March 31,



March 31,



March 31,



2023



2022



2023



2022














Cash flows from operating activities:












Net income

$

63,504



$

89,679



$

138,539



$

135,768


Stock-based compensation


52,246




37,921




93,750




83,863


Depreciation and amortization


27,709




21,380




49,037




43,468


Amortization of right-of-use lease assets


8,510




8,676




16,564




17,536


Accounts receivable


(19,034)




(45,006)




86,478




12,310


Accounts payable and accruals


2,492




(55,744)




(7,358)




(39,932)


Deferred revenue


55,727




60,708




36,092




47,012


Income taxes


4,667




2,049




(12,169)




(6,279)


Other


15,127




22,662




(9,064)




(13,685)


Net cash provided by operating activities


210,948




142,325




391,869




280,061














Capital expenditures


(3,770)




(2,148)




(12,950)




(5,510)


Acquisition of businesses, net of cash acquired (1)


(828,271)




-




(828,271)




-


Borrowings (payments) on debt, net(2)


566,000




(175,000)




566,000




(175,000)


Repurchases of common stock


-




(5,261)




-




(125,000)


Net proceeds associated with issuance of common stock


10,592




10,857




10,592




10,857


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


(3,599)




(1,430)




(56,022)




(50,595)


awards












Net proceeds from sale (purchases) of investments (3)


(5,823)




42,693




(5,823)




42,693


Credit facility origination costs


(12,005)




-




(13,355)





Other financing & investing activities


(1,749)




831




(12,915)




6,615


Foreign exchange impact on cash


565




(2,078)




9,181




(3,739)














Net change in cash, cash equivalents, and restricted cash


(67,112)




10,789




48,306




(19,618)


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


388,306




296,639




272,888




327,046


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

$

321,194



$

307,428



$

321,194



$

307,428














(1) In Q2'23, we acquired ServiceMax Inc. for $1,448 million, net of cash acquired.  We paid $828 million in Q2'23 with the
remaining $650 million to be paid in Q1'24.  Of the $650 million to be paid, $620 million will be a financing outflow and $30
million of imputed interest will be an operating cash outflow.


(2) In Q2'23, net borrowings were related to a credit facility established to fund the ServiceMax acquisition.


(3) In Q2'22, we sold an equity investment in a publicly-traded company.


 

PTC Inc.


NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)


(in thousands)



























Three Months Ended



Six Months Ended



March 31,



March 31,



March 31,



March 31,



2023



2022



2023



2022


Cash provided by operating activities(1)

$

210,948



$

142,325



$

391,869



$

280,061


Capital expenditures


(3,770)




(2,148)




(12,950)




(5,510)


Free cash flow(1)

$

207,178



$

140,177



$

378,919



$

274,551














(1) In the three and six months ended March 31, 2023, we made $2.3 million and $6.6 million of acquisition and transaction-
related payments, respectively, and $0.8 million and $1.4 million of restructuring payments, respectively.  In the three and six
months ended March 31,2022, we made $0.4 million and $0.4 million acquisition and transaction-related payments,
respectively, and $17.8 million and $28.4 million of restructuring payments, respectively.  These payments are included within
cash provided by operating activities and free cash flow.


 

 

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SOURCE PTC Inc.

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Company Name: PTC Inc.
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