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PTC ANNOUNCES THIRD FISCAL QUARTER 2024 RESULTS

BOSTON, July 31, 2024 — (PRNewswire) — PTC (NASDAQ: PTC) today reported financial results for its third fiscal quarter ended June 30, 2024.

"In our third fiscal quarter, we again delivered solid ARR and cash flow, with year-over-year ARR growth in the low double-digits and cash flow growth above 20%. We have a differentiated strategy that leverages our unique product portfolio to help product companies accelerate time to market and manage increasing complexity. It's an exciting time because our products are at the epicenter of driving business transformation at our customers. We are strengthening our ability to scale our business by continuing to align our resources with our five focus areas," said Neil Barua, CEO, PTC.

Third Quarter 2024 Highlights

Key operating and financial highlights are set forth below. 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

Q3'24

Q3'23

YoY Change


Q3'24
Guidance

ARR as reported

$2,126

$1,929

10 %



Constant currency ARR

$2,125

$1,904

12 %


$2,115 - $2,130

Operating cash flow

$214

$169

26 %


~$225

Free cash flow

$212

$164

29 %


~$220

Revenue1

$519

$542

(4%)2


$525 - $540

Operating margin1

18 %

20 %

(~180 bps)



Non-GAAP operating margin1

32 %

34 %

(~240 bps)



Earnings per share1

$0.573

$0.51

11 %


$0.41 - $0.54

Non-GAAP earnings per share1

$0.984

$0.99

(1 %)


$0.90 - $1.00

Total cash and cash equivalents

$248

$282

(12 %)



Gross debt5

$1,816

$2,3656

(23 %)





1

Revenue and, as a result, operating margin, operating profit, and earnings per share are impacted under ASC 606.

2

In Q3'24, revenue declined 3% year over year on a constant currency basis.

3

In Q3'24, GAAP EPS included a non-cash tax benefit of $14.2 million or $0.12, primarily associated with the effects of IRS procedural guidance issued in May 2024.

4

In Q3'24, non-GAAP EPS included a non-cash tax benefit of $9.8 million or $0.08, primarily associated with the effects of IRS procedural guidance issued in May 2024.

5

Gross debt excludes unamortized debt issuance costs.

6

Q3'23 gross debt included a deferred acquisition payment related to ServiceMax of $620 million, which was paid in October 2023. 

Fiscal 2024 and Q4'24 Guidance

"In a selling environment that continued to be challenging, our Q3'24 ARR grew 10% year over year, and constant currency ARR grew 12% year over year, driven by our differentiated product portfolio, the resilience of our subscription business model, operational discipline, and the actions we have taken over time to align our investments with market opportunities. Our Q3'24 free cash flow growth of 29% was also solid, although slightly below our guidance due to timing. Reflecting our year-to-date performance and our outlook for the fourth quarter, we are updating our FY'24 constant currency ARR guidance range to 11 to 12 percent growth and maintaining our FY'24 free cash flow guidance. We believe we have set our guidance appropriately," said Kristian Talvitie, CFO.

  $ in millions

FY'24 Previous
Guidance

FY'24
Guidance

FY'24 YoY Growth
Guidance

Q4'24
Guidance



Constant currency ARR

$2,200 - $2,240

$2,200 - $2,220

11% - 12%

$2,200 - $2,220


Operating cash flow

~$745

~$740

~21%

~$88


Free cash flow

~$725

~$725

~23%

~$83


Revenue

$2,270 - $2,340

$2,270 - $2,320

8% - 11%

$598 - $648


Earnings per share

$2.52 - $3.22

$2.78 - $3.35

35% - 63%

$0.72 - $1.29


Non-GAAP earnings per share

$4.60 - $5.10

$4.85 - $5.21

12% - 20%

$1.30 - $1.66


Reconciliation of Operating Cash Flow Guidance to Free Cash Flow Guidance

  In millions

FY'24
Guidance

Q4'24
Guidance




  Operating Cash Flow

~$740

~$88



Capital expenditures

(~$15)

(~$5)



  Free Cash Flow

~$725

~$83



Reconciliation of EPS Guidance to Non-GAAP EPS Guidance


FY'24
Guidance

Q4'24
Guidance



Earnings per share

$2.78 - $3.35

$0.72 - $1.29


Stock-based compensation expense

$1.90 - $1.74

$0.56 - $0.40


Intangible asset amortization expense

~$0.67

~$0.17


Acquisition and transaction-related expense

~$0.02

~$0.00


Other non-operating expenses, related to an impairment loss on an
     available for sale debt security

~$0.02

~$0.00


Income tax adjustments related to the reconciling items

($0.59) – ($0.54)

($0.20) – ($0.15)


Non-GAAP Earnings per share

$4.85 - $5.21

$1.30 - $1.66


FY'24 and Q4'24 financial guidance includes the following assumptions:

PTC's Fiscal Third Quarter Conference Call

The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, July 31, 2024. To participate in the live conference call, dial (888) 330-2508 or (240) 789-2735, provide the passcode 7328695, 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; restructuring and other charges and 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, 2023.

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 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 exchange rate fluctuations. To present CC information, FY'24 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, 2023, 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, 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 ARR: We provide an organic 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. We do not adjust for acquisitions that have an immaterial impact on our ARR results when providing organic ARR 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. We do not adjust for acquisitions that have an immaterial impact on our ARR results when providing organic constant currency ARR results.

Deferred ARR: Deferred ARR is ARR attributable to our portfolio of subscription software, cloud, SaaS and support contracts that are not active as of the end of the reporting period but are contractually committed to commence in a future period.

Because ARR is independent of recognized and unearned revenue, deferred ARR should not be viewed as a measurement of revenue which will be recognized in future periods.

Forward-Looking Statements

Statements in this document that are not historic facts, including statements about our future financial and growth expectations 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 not improve or may deteriorate due to, among other factors, high interest rates or increases in 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 conflicts between Russia and Ukraine and in the Middle East, 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 and cash flow; our investments in our software solutions may not drive expansion of those solutions and/or generate the ARR and/or cash flow we expect if customers are slower to adopt those solutions than we expect or if they adopt competing solutions; our strategic initiatives to improve organizational and operational efficiency may not do so when or as we expect; other uses of cash or our credit facility limits could limit or preclude the return of 50% of free cash flow to shareholders via share repurchases, or could change our expectations about the amount and timing of any share 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 changes to tax laws in the U.S. and other countries and 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, Quarterly Reports on Form 10-Q, and other filings with the U.S. Securities and Exchange Commission.

About PTC (NASDAQ: PTC)

PTC (NASDAQ: PTC) is a global software company that enables industrial and manufacturing companies to digitally transform how they engineer, manufacture, and service the physical products that the world relies on. Headquartered in Boston, Massachusetts, PTC employs over 7,000 people and supports more than 25,000 customers globally. For more information, please visit www.ptc.com.

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


UNAUDITED CONSOLIDATED STATEMENTS OF INCOME


(in thousands, except per share data)



























Three Months Ended



Nine Months Ended



June 30,



June 30,



June 30,



June 30,



2024



2023



2024



2023














Revenue:












Recurring revenue

$

481,559



$

498,410



$

1,551,600



$

1,407,662


Perpetual license


7,050




8,251




22,243




30,417


Professional services


30,030




35,681




98,082




112,354


Total revenue (1)


518,639




542,342




1,671,925




1,550,433














Cost of revenue (2)


111,916




115,854




331,991




325,150














Gross margin


406,723




426,488




1,339,934




1,225,283














Operating expenses:












Sales and marketing (2)


140,318




145,083




411,763




392,673


Research and development (2)


110,253




103,819




323,034




292,345


General and administrative (2)


49,659




57,055




180,391




173,949


Amortization of acquired intangible assets


10,672




10,670




31,459




29,352


Restructuring and other credits, net


-




(39)




(802)




(376)


Total operating expenses


310,902




316,588




945,845




887,943














Operating income


95,821




109,900




394,089




337,340


Other expense, net


(28,448)




(33,374)




(95,372)




(93,321)


Income before income taxes


67,373




76,526




298,717




244,019


Provision (benefit) for income taxes


(1,605)




15,128




48,907




44,082


Net income

$

68,978



$

61,398



$

249,810



$

199,937














Earnings per share:












Basic

$

0.58



$

0.52



$

2.09



$

1.69


Weighted average shares outstanding


119,893




118,483




119,533




118,186














Diluted

$

0.57



$

0.51



$

2.07



$

1.68


Weighted average shares outstanding


120,822




119,392




120,593




119,072




(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



Nine Months Ended



June 30,



June 30,



June 30,



June 30,



2024



2023



2024



2023


License revenue (1)

$

149,104



$

192,940



$

567,423



$

562,631


Support and cloud services revenue


339,505




313,721




1,006,420




875,448


Professional services revenue


30,030




35,681




98,082




112,354


Total revenue

$

518,639



$

542,342



$

1,671,925



$

1,550,433














(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



Nine Months Ended



June 30,



June 30,



June 30,



June 30,



2024



2023



2024



2023


Cost of revenue

$

5,856



$

5,847



$

15,979



$

15,668


Sales and marketing


15,167




14,513




46,023




39,554


Research and development


13,101




14,801




41,275




41,839


General and administrative


13,914




18,657




57,965




50,507


Total stock-based compensation

$

48,038



$

53,818



$

161,242



$

147,568


 

PTC Inc.


NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)


(in thousands, except per share data)















Three Months Ended



Nine Months Ended



June 30,



June 30,



June 30,



June 30,



2024



2023



2024



2023














GAAP gross margin

$

406,723



$

426,488



$

1,339,934



$

1,225,283


Stock-based compensation


5,856




5,847




15,979




15,668


Amortization of acquired intangible assets included in cost of
revenue


9,685




9,841




28,835




25,817


Non-GAAP gross margin

$

422,264



$

442,176



$

1,384,748



$

1,266,768














GAAP operating income

$

95,821



$

109,900



$

394,089



$

337,340


Stock-based compensation


48,038




53,818




161,242




147,568


Amortization of acquired intangible assets


20,357




20,511




60,294




55,169


Acquisition and transaction-related charges


154




795




2,962




18,484


Restructuring and other credits, net


-




(39)




(802)




(376)


Non-GAAP operating income (1)

$

164,370



$

184,985



$

617,785



$

558,185














GAAP net income

$

68,978



$

61,398



$

249,810



$

199,937


Stock-based compensation


48,038




53,818




161,242




147,568


Amortization of acquired intangible assets


20,357




20,511




60,294




55,169


Acquisition and transaction-related charges


154




795




2,962




18,484


Restructuring and other credits, net


-




(39)




(802)




(376)


Non-operating charges, net (2)


-




-




2,000




5,147


Income tax adjustments (3)


(19,538)




(18,830)




(48,162)




(52,506)


Non-GAAP net income

$

117,989



$

117,653



$

427,344



$

373,423














GAAP diluted earnings per share

$

0.57



$

0.51



$

2.07



$

1.68


Stock-based compensation


0.40




0.45




1.34




1.24


Amortization of acquired intangibles


0.17




0.17




0.50




0.46


Acquisition and transaction-related charges


0.00




0.01




0.02




0.16


Restructuring and other credits, net


-




(0.00)




(0.01)




(0.00)


Non-operating charges, net (2)


-




-




0.02




0.04


Income tax adjustments (3)


(0.16)




(0.16)




(0.40)




(0.44)


Non-GAAP diluted earnings per share

$

0.98



$

0.99



$

3.54



$

3.14














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













Three Months Ended



Nine Months Ended



June 30,



June 30,



June 30,



June 30,



2024



2023



2024



2023


GAAP operating margin


18.5

%



20.3

%



23.6

%



21.8

%

Stock-based compensation


9.3

%



9.9

%



9.6

%



9.5

%

Amortization of acquired intangibles


3.9

%



3.8

%



3.6

%



3.6

%

Acquisition and transaction-related charges


0.0

%



0.1

%



0.2

%



1.2

%

Restructuring and other credits, net


0.0

%



0.0

%



0.0

%



0.0

%

Non-GAAP operating margin


31.7

%



34.1

%



37.0

%



36.0

%



(2) In the first nine months of FY'24, we recognized an impairment loss of $2.0 million on an available-for-sale debt security. In the first nine months of FY'23, we recognized $4.2 million of financing charges for a debt commitment agreement associated with our acquisition of ServiceMax.


(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. Additionally, in the first nine months of FY'24, adjustments exclude a tax expense of $3.6 million for a tax reserve related to prior years in a foreign jurisdiction.


 

PTC Inc.


UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


(in thousands)















June 30,



September 30,



2024



2023








ASSETS












Cash and cash equivalents

$

247,749



$

288,103


Accounts receivable, net


674,959




811,398


Property and equipment, net


77,535




88,391


Goodwill and acquired intangible assets, net


4,352,750




4,299,760


Lease assets, net


131,297




143,028


Other assets


643,855




658,162








Total assets

$

6,128,145



$

6,288,842








LIABILITIES AND STOCKHOLDERS' EQUITY












Deferred revenue

$

687,614



$

681,550


Debt, net of deferred issuance costs


1,811,154




1,695,785


Deferred acquisition payments (1)


-




620,040


Lease obligations


180,274




193,192


Other liabilities


434,424




420,985


Stockholders' equity


3,014,679




2,677,290








Total liabilities and stockholders' equity

$

6,128,145



$

6,288,842




(1) FY'23 Deferred acquisition payments represented the fair value of the $650 million payment associated with the ServiceMax, Inc. acquisition, which was paid in Q1'24.


 

PTC Inc.


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(in thousands)







































Three Months Ended



Nine Months Ended



June 30,



June 30,



June 30,



June 30,



2024



2023



2024



2023














Cash flows from operating activities:












Net income

$

68,978



$

61,398



$

249,810



$

199,937


Stock-based compensation


48,038




53,818




161,242




147,568


Depreciation and amortization


27,128




27,906




81,272




76,943


Amortization of right-of-use lease assets


7,684




8,141




23,143




24,705


Operating lease liability


(3,145)




(6,345)




(13,438)




(1,360)


Accounts receivable


23,915




13,043




131,422




99,521


Accounts payable and accruals


64,831




18,726




35




11,368


Deferred revenue


(32,578)




(17,396)




8,393




18,696


Income taxes


(19,882)




2,259




(1,795)




(9,910)


Other


28,830




7,673




11,786




(6,376)


Net cash provided by operating activities


213,799




169,223




651,870




561,092














Capital expenditures


(1,639)




(5,085)




(9,841)




(18,035)


Acquisition of businesses, net of cash acquired(1)


-




-




(93,457)




(828,271)


Borrowings (payments) on debt, net(2)


(195,125)




(180,000)




109,049




386,000


Deferred acquisition payment(3)


-




-




(620,040)




-


Net proceeds associated with issuance of common stock


-




-




12,709




10,592


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


(21,405)




(19,467)




(92,589)




(75,489)


Settlement of net investment hedges


6,050




(1,660)




3,826




(14,204)


Net proceeds from sale (purchases) of investments


-




349




-




(5,474)


Credit facility origination costs


-




-




-




(13,355)


Other financing & investing activities


-




-




-




(371)


Foreign exchange impact on cash


(2,832)




(2,346)




(2,003)




6,835














Net change in cash, cash equivalents, and restricted cash


(1,152)




(38,986)




(40,476)




9,320


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


249,474




321,194




288,798




272,888


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

$

248,322



$

282,208



$

248,322



$

282,208














Supplemental cash flow information:












Cash paid for interest(3)

$

18,375



$

22,576



$

112,394



$

51,946




(1) In Q1'24, we acquired pure-systems for $93 million, net of cash acquired. In Q2'23, we acquired ServiceMax Inc. for $1,448 million, net of cash acquired. We paid $828 million in Q2'23 and the remaining $620 million in Q1'24.


(2) In Q1'24, we borrowed $740 million to fund the ServiceMax deferred acquisition payment and the pure-systems acquisition. Subsequently, we've made net payments of $631 million.


(3) In Q1'24, we made a payment of $650 million to settle the ServiceMax deferred acquisition payment liability, of which $620 million is a financing outflow and $30 million is an operating outflow and included in cash paid for interest.


 

PTC Inc.


NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)


(in thousands)



























Three Months Ended



Nine Months Ended



June 30,



June 30,



June 30,



June 30,



2024



2023



2024



2023


Cash provided by operating activities

$

213,799



$

169,223



$

651,870



$

561,092


Capital expenditures


(1,639)




(5,085)




(9,841)




(18,035)


Free cash flow

$

212,160



$

164,138



$

642,029



$

543,057


 

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Company Name: PTC Inc.
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