PTC Announces First Quarter Fiscal Year 2019 Results

PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)


	Three Months Ended
	December 29,			December 29,			December 30,
	2018			2018			2017
	ASC 606			ASC 605			ASC 605

Revenue:
Subscription license	$	63,517
Subscription support & cloud services		77,424
Total Subscription		140,941		$	148,413		$	100,008
Perpetual support		110,497			109,225			131,197
Total recurring revenue		251,438			257,638			231,205
Perpetual license		41,805			41,750			33,985
Total software revenue		293,243			299,388			265,190
Professional services		41,446			39,369			41,454
Total revenue ⁽¹⁾		334,689			338,757			306,644

Cost of revenue:
Cost of software revenue ^{(2) (3)}		43,760			42,977			46,616
Cost of professional services revenue ^{(2) (3)}		33,592			32,219			36,419
Total cost of revenue		77,352			75,196			83,035

Gross margin		257,337			263,561			223,609

Operating expenses:
Sales and marketing ^{(2) (3)}		104,218			107,304			99,375
Research and development ^{(2) (3)}		60,782			60,782			63,972
General and administrative ^{(2) (3)}		37,864			37,864			35,020
Amortization of acquired intangible assets		5,936			5,936			7,821
Restructuring and headquarters charges, net		18,493			18,493			105
Total operating expenses		227,293			230,379			206,293

Operating income		30,044			33,182			17,316
Other expense, net ⁽³⁾		(9,621	)		(9,728	)		(10,845	)
Income before income taxes		20,423			23,454			6,471
Benefit for income taxes ⁽⁴⁾		(562	)		4,206			(7,406	)
Net income	$	20,985		$	19,248		$	13,877

Earnings per share:
Basic	$	0.18		$	0.16		$	0.12
Weighted average shares outstanding		118,323			118,323			115,731

Diluted	$	0.18		$	0.16		$	0.12
Weighted average shares outstanding		119,638			119,638			117,656

(1)		See supplemental financial data for revenue by license, support, and professional services.
(2)		See supplemental financial data for additional information about stock-based compensation.
(3)		In the first quarter of fiscal 2019, we adopted Accounting Standards Update (ASU) 2017-07 - Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost. In accordance with this guidance, we reclassified $0.2 million of non-service related net periodic pension income to other expense, net from cost of revenue and operating expenses for the three months ended December 30, 2017.
(4)		In Q1’18 our effective tax rate includes a benefit of $7 million relating to the enactment of the Tax Cuts and Jobs Act.

PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)


Revenue by license, support and services is as follows:
	Three Months Ended
	December 29,		December 29,		December 30,
	2018		2018		2017
	ASC 606		ASC 605		ASC 605
License revenue ⁽¹⁾	$	105,322	$	173,905	$	119,518
Support and cloud services revenue		187,921		125,483		145,672
Professional services revenue		41,446		39,369		41,454
Total revenue	$	334,689	$	338,757	$	306,644

(1) Under ASC 605, all subscription revenue is classified as license revenue.

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

	Three Months Ended
	December 29,		December 29,		December 30,
	2018		2018		2017
	ASC 606		ASC 605		ASC 605
Cost of software revenue	$	1,297	$	1,297	$	1,221
Cost of professional services revenue		1,814		1,814		1,706
Sales and marketing		9,722		9,722		4,879
Research and development		4,900		4,900		2,960
General and administrative		11,674		11,674		7,565
Total stock-based compensation	$	29,407	$	29,407	$	18,331

PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)

	Three Months Ended
	December 29,			December 29,			December 30,
	2018			2018			2017
	ASC 606			ASC 605			ASC 605

GAAP revenue	$	334,689		$	338,757		$	306,644
Fair value adjustment of acquired deferred subscription revenue		66			66			117
Fair value adjustment of acquired deferred services revenue		207			207			246
Non-GAAP revenue	$	334,962		$	339,030		$	307,007

GAAP gross margin	$	257,337		$	263,561		$	223,609
Fair value adjustment of acquired deferred revenue		273			273			363
Fair value adjustment to deferred services cost		(85	)		(85	)		(104	)
Stock-based compensation		3,111			3,111			2,927
Amortization of acquired intangible assets included in cost of revenue		6,717			6,717			6,675
Non-GAAP gross margin	$	267,353		$	273,577		$	233,470

GAAP operating income	$	30,044		$	33,182		$	17,316
Fair value adjustment of acquired deferred revenue		273			273			363
Fair value adjustment to deferred services cost		(85	)		(85	)		(104	)
Stock-based compensation		29,407			29,407			18,331
Amortization of acquired intangible assets included in cost of revenue		6,717			6,717			6,675
Amortization of acquired intangible assets		5,936			5,936			7,821
Acquisition-related and other transactional charges included in general and administrative costs		419			419			7
Restructuring charges, net		16,586			16,586			105
Headquarters relocation charges		1,907			1,907			-
Non-GAAP operating income ⁽¹⁾	$	91,204		$	94,342		$	50,514

GAAP net income	$	20,985		$	19,248		$	13,877
Fair value adjustment of acquired deferred revenue		273			273			363
Fair value adjustment to deferred services cost		(85	)		(85	)		(104	)
Stock-based compensation		29,407			29,407			18,331
Amortization of acquired intangible assets included in cost of revenue		6,717			6,717			6,675
Amortization of acquired intangible assets		5,936			5,936			7,821
Acquisition-related and other transactional charges included in general and administrative costs		419			419			7
Restructuring charges, net		16,586			16,586			105
Headquarters relocation charges		1,907			1,907			-
Income tax adjustments ⁽²⁾		(14,855	)		(12,141	)		(11,000	)
Non-GAAP net income	$	67,290		$	68,267		$	36,075

GAAP diluted earnings per share	$	0.18		$	0.16		$	0.12
Fair value adjustment of acquired deferred revenue		-			-			-
Stock-based compensation		0.25			0.25			0.16
Amortization of acquired intangibles		0.11			0.11			0.12
Acquisition-related and other transactional charges		-			-			-
Restructuring charges, net		0.14			0.14			-
Headquarters relocation charges		0.02			0.02			-
Income tax adjustments		(0.12	)		(0.10	)		(0.09	)
Non-GAAP diluted earnings per share	$	0.56		$	0.57		$	0.31

(1) Operating margin impact of non-GAAP adjustments:
	Three Months Ended
	December 29,			December 29,			December 30,
	2018			2018			2017
	ASC 606			ASC 605			ASC 605
GAAP operating margin		9.0	%		9.8	%		5.7	%
Fair value adjustment of acquired deferred revenue		0.1	%		0.1	%		0.1	%
Fair value adjustment to deferred services cost		0.0	%		0.0	%		0.0	%
Stock-based compensation		8.8	%		8.7	%		6.0	%
Amortization of acquired intangibles		3.8	%		3.7	%		4.7	%
Acquisition-related and other transactional charges		0.1	%		0.1	%		0.0	%
Restructuring charges, net		5.0	%		4.9	%		0.0	%
Headquarters relocation charges		0.6	%		0.6	%		0.0	%
Non-GAAP operating margin		27.2	%		27.8	%		16.5	%

		(2)		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 2019 and 2018 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. 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. We have recorded the impact of the Tax Cuts and Jobs Act in our Q1'18 GAAP earnings, resulting in a non-cash benefit of approximately $7 million. We have excluded this benefit from our non-GAAP results.

PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)


	December 29,		December 29,		September 30,
	2018		2018		2018
	ASC 606 ⁽¹⁾		ASC 605		ASC 605

ASSETS

Cash and cash equivalents	$	276,990	$	276,990	$	259,946
Marketable securities		55,652		55,652		55,951
Accounts receivable, net		385,672		138,989		129,297
Property and equipment, net		107,359		107,359		80,613
Goodwill and acquired intangible assets, net		1,435,985		1,435,985		1,382,659
Other assets		490,189		475,035		420,556

Total assets	$	2,751,847	$	2,490,010	$	2,329,022

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue	$	336,129	$	492,937	$	499,442
Debt, net of deferred issuance costs		778,484		778,484		643,268
Other liabilities		316,065		265,207		311,723
Stockholders' equity		1,321,169		953,382		874,589

Total liabilities and stockholders' equity	$	2,751,847	$	2,490,010	$	2,329,022

(1)		The Company’s consolidated balance sheet as of December 29, 2018 under ASC 606 is preliminary, pending final adjustments required as a result of our adoption of ASC 606 in the first quarter of 2019. We expect the adjustments to be finalized prior to the filing of our Form 10-Q for the first quarter of 2019.

PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)



	Three Months Ended
	December 29,			December 30,
	2018			2017

Cash flows from operating activities:
Net income	$	20,985		$	13,877
Stock-based compensation		29,407			18,331
Depreciation and amortization		20,053			21,046
Accounts receivable		24,586			21,603
Accounts payable and accruals		(39,075	)		(53,057	)
Deferred revenue		(20,999	)		22,055
Income taxes		(21,668	)		(14,272	)
Other ⁽¹⁾		7,925			(4,068	)
Net cash provided by operating activities ⁽³⁾		21,214			25,515

Capital expenditures		(30,332	)		(6,377	)
Acquisition of businesses, net of cash acquired ⁽²⁾		(69,556	)		-
Purchase of intangible asset		-			(2,500	)
Borrowings (payments) on debt, net		135,000			30,000
Costs associated with issuance of common stock		(4,640	)		-
Payments of withholding taxes in connection with
vesting of stock-based awards		(33,788	)		(33,488	)
Contingent consideration		(1,575	)		(3,176	)
Other financing & investing activities		(1,324	)		(508	)
Foreign exchange impact on cash		2,041			2,598

Net change in cash, cash equivalents, and restricted cash ⁽¹⁾		17,040			12,064
Cash, cash equivalents, and restricted cash, beginning of period		261,093			281,209
Cash, cash equivalents, and restricted cash, end of period	$	278,133		$	293,273

(1)		In the first quarter of fiscal 2019, we adopted Accounting Standards Update (ASU) 2016-18 - Statement of Cash Flows (Topic 230). In accordance with this guidance, we excluded the $0.4 million increase related to the change in restricted cash from the change in other current assets for the three months ended December 30, 2017.
(2)		In the three months ended December 29, 2018, we acquired Frustum for $70 million, net of cash acquired.
(3)		The Company’s consolidated cash flows as of December 29, 2018 under ASC 606 is preliminary, pending final balance sheet adjustments required as a result of our adoption of ASC 606 in the first quarter of 2019, which will impact components of operating cash flow, but not total cash from operating activities. We expect the adjustments to be finalized prior to the filing of our Form 10-Q for the first quarter of 2019.

« Previous Page 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 Next Page »