PTC Announces Third Quarter Fiscal Year 2019 Results

(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) Periods prior to 2019 reflect immaterial expense reclassifications in connection with the adoption of new pension accounting prescribed in Accounting Standards Update 2017-07.

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


				Nine Months Ended
				June 29,			June 29,			June 30,
				2019			2019			2018
				ASC 606			ASC 605			ASC 605

Revenue:
	Subscription license			$	168,762
	Subscription support & cloud services				250,811
Total Subscription					419,573		$	482,114		$	339,651
	Perpetual support				315,242			312,453			379,007
Total recurring revenue					734,815			794,567			718,658
	Perpetual license				61,354			63,661			82,604
Total software revenue					796,169			858,228			801,262
	Professional services				124,457			118,438			128,041
Total revenue ⁽¹⁾					920,626			976,666			929,303

Cost of revenue:
	Cost of software revenue ^{(2) (3)}				136,601			134,803			139,078
	Cost of professional services revenue ^{(2) (3)}				103,360			99,593			109,298
Total cost of revenue					239,961			234,396			248,376

Gross margin					680,665			742,270			680,927

Operating expenses:
	Sales and marketing ^{(2) (3)}				316,142			330,258			305,566
	Research and development ^{(2) (3)}				182,774			182,774			187,390
	General and administrative ^{(2) (3)}				102,008			102,008			101,487
	Amortization of acquired intangible assets				17,786			17,786			23,566
	Restructuring and other charges, net				45,464			45,464			1,846
Total operating expenses					664,174			678,290			619,855

Operating income					16,491			63,980			61,072
	Other expense, net ⁽³⁾				(29,974	)		(30,126	)		(33,085	)
Income (loss) before income taxes					(13,483	)		33,854			27,987
	Provision (benefit) for income taxes ⁽⁴⁾				23,803			14,931			(10,809	)
Net income (loss)				$	(37,286	)	$	18,923		$	38,796

Earnings (loss) per share:
	Basic			$	(0.32	)	$	0.16		$	0.33
			Weighted average shares outstanding		117,636			117,636			115,915

	Diluted			$	(0.32	)	$	0.16		$	0.33
			Weighted average shares outstanding		117,636			118,664			117,687


	(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	)	Periods prior to 2019 reflect immaterial expense reclassifications in connection with the adoption of new pension accounting prescribed in Accounting Standards Update 2017-07.
	(4	)	Our 2018 year-to-date tax rate includes a benefit of $7 million relating to the enactment of the Tax Cuts and Jobs Act.

PTC Inc.
SUPPLEMENTAL FINANCIAL DATA FOR REVENUE AND STOCK-BASED COMPENSATION
(in thousands)


Revenue by license, support and services is as follows:
	Three Months Ended
	June 29,		June 29,		June 30,
	2019		2019		2018
	ASC 606		ASC 605		ASC 605
License revenue ⁽¹⁾	$	62,918	$	163,220	$	136,568
Support and cloud services revenue		190,487		118,719		137,051
Professional services revenue		42,081		40,471		41,158
Total revenue	$	295,486	$	322,410	$	314,777

	Nine Months Ended
	June 29,		June 29,		June 30,
	2019		2019		2018
	ASC 606		ASC 605		ASC 605
License revenue ⁽¹⁾	$	230,116	$	493,256	$	376,591
Support and cloud services revenue		566,053		364,972		424,671
Professional services revenue		124,457		118,438		128,041
Total revenue	$	920,626	$	976,666	$	929,303

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

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

	Three Months Ended
	June 29,		June 29,		June 30,
	2019		2019		2018
	ASC 606		ASC 605		ASC 605
Cost of software revenue	$	1,219	$	1,219	$	948
Cost of professional services revenue		1,345		1,345		1,471
Sales and marketing		5,870		5,870		4,910
Research and development		4,761		4,761		3,283
General and administrative		2,039		2,039		6,046
Total stock-based compensation	$	15,234	$	15,234	$	16,658

	Nine Months Ended
	June 29,		June 29,		June 30,
	2019		2019		2018
	ASC 606		ASC 605		ASC 605
Cost of software revenue	$	3,722	$	3,722	$	3,267
Cost of professional services revenue		5,065		5,065		4,846
Sales and marketing		25,114		25,114		14,827
Research and development		14,851		14,851		9,626
General and administrative		22,856		22,856		19,449
Total stock-based compensation	$	71,608	$	71,608	$	52,015

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

				Three Months Ended
				June 29,			June 29,			June 30,
				2019			2019			2018
				ASC 606			ASC 605			ASC 605

GAAP revenue				$	295,486		$	322,410		$	314,777
	Fair value adjustment of acquired deferred subscription revenue				-			-			75
	Fair value adjustment of acquired deferred services revenue				124			124			225
Non-GAAP revenue				$	295,610		$	322,534		$	315,077

GAAP gross margin				$	212,781		$	241,177		$	233,144
	Fair value adjustment of acquired deferred revenue				124			124			300
	Fair value adjustment to deferred services cost				(58	)		(58	)		(93	)
	Stock-based compensation				2,564			2,564			2,419
	Amortization of acquired intangible assets included in cost of revenue				6,873			6,873			6,798
Non-GAAP gross margin				$	222,284		$	250,680		$	242,568

GAAP operating income				$	9,305		$	32,370		$	21,547
	Fair value adjustment of acquired deferred revenue				124			124			300
	Fair value adjustment to deferred services cost				(58	)		(58	)		(93	)
	Stock-based compensation				15,234			15,234			16,658
	Amortization of acquired intangible assets included in cost of revenue				6,873			6,873			6,798
	Amortization of acquired intangible assets				5,920			5,920			7,850
	Aquisition-related and other transactional charges included in general and administrative costs				424			424			1,578
	Restructuring and other charges, net				(9	)		(9	)		1,627
Non-GAAP operating income ⁽¹⁾				$	37,813		$	60,878		$	56,265

GAAP net income (loss)				$	(14,758	)	$	11,705		$	16,997
	Fair value adjustment of acquired deferred revenue				124			124			300
	Fair value adjustment to deferred services cost				(58	)		(58	)		(93	)
	Stock-based compensation				15,234			15,234			16,658
	Amortization of acquired intangible assets included in cost of revenue				6,873			6,873			6,798
	Amortization of acquired intangible assets				5,920			5,920			7,850
	Acquisition-related and other transactional charges included in general and administrative costs				424			424			1,578
	Restructuring and other charges, net				(9	)		(9	)		1,627
	Income tax adjustments ⁽²⁾				13,121			1,683			(9,657	)
Non-GAAP net income				$	26,871		$	41,896		$	42,058

GAAP diluted earnings (loss) per share				$	(0.13	)	$	0.10		$	0.14
	Fair value adjustment of acquired deferred revenue				-			-			-
	Stock-based compensation				0.13			0.13			0.14
	Amortization of acquired intangibles				0.11			0.11			0.12
	Acquisition-related and other transactional charges				-			-			0.01
	Restructuring and other charges, net				-			-			0.02
	Income tax adjustments				0.11			0.01			(0.08	)
Non-GAAP diluted earnings per share				$	0.23		$	0.36		$	0.36

GAAP diluted weighted average shares outstanding					116,133			117,019			117,500
	Dilutive effect of stock-based compensation plans				886			-			-
Non-GAAP diluted weighted average shares outstanding					117,019			117,019			117,500

	(1	)	Operating margin impact of non-GAAP adjustments:
				Three Months Ended
				June 29,			June 29,			June 30,
				2019			2019			2018
				ASC 606			ASC 605			ASC 605
	GAAP operating margin				3.1	%		10.0	%		6.8	%
			Fair value adjustment of acquired deferred revenue		0.0	%		0.0	%		0.1	%
			Fair value adjustment to deferred services cost		0.0	%		0.0	%		0.0	%
			Stock-based compensation		5.2	%		4.7	%		5.3	%
			Amortization of acquired intangibles		4.3	%		4.0	%		4.7	%
			Acquisition-related and other transactional charges		0.1	%		0.1	%		0.5	%
			Restructuring and other charges, net		0.0	%		0.0	%		0.5	%
	Non-GAAP operating margin				12.8	%		18.9	%		17.9	%

	(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 also excluded a tax charge of $0.9M relating to the change in the functional currency of a wholly owned foreign subsidiary.

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

		Nine Months Ended
		June 29,			June 29,			June 30,
		2019			2019			2018
		ASC 606			ASC 605			ASC 605

GAAP revenue		$	920,626		$	976,666		$	929,303
	Fair value adjustment of acquired deferred subscription revenue		66			66			266
	Fair value adjustment of acquired deferred services revenue		529			529			706
Non-GAAP revenue		$	921,221		$	977,261		$	930,275

GAAP gross margin		$	680,665		$	742,270		$	680,927
	Fair value adjustment of acquired deferred revenue		595			595			972
	Fair value adjustment to deferred services cost		(220	)		(220	)		(293	)
	Stock-based compensation		8,787			8,787			8,113
	Amortization of acquired intangible assets included in cost of revenue		20,432			20,432			20,029
Non-GAAP gross margin		$	710,259		$	771,864		$	709,748

GAAP operating income		$	16,491		$	63,980		$	61,072
	Fair value adjustment of acquired deferred revenue		595			595			972
	Fair value adjustment to deferred services cost		(220	)		(220	)		(293	)
	Stock-based compensation		71,608			71,608			52,015
	Amortization of acquired intangible assets included in cost of revenue		20,432			20,432			20,029
	Amortization of acquired intangible assets		17,786			17,786			23,566
	Acquisition-related and other transactional charges included in general and administrative costs		1,215			1,215			1,718
	Restructuring and other charges, net		45,464			45,464			1,846
Non-GAAP operating income ⁽¹⁾		$	173,371		$	220,860		$	160,925

GAAP net income (loss)		$	(37,286	)	$	18,923		$	38,796
	Fair value adjustment of acquired deferred revenue		595			595			972
	Fair value adjustment to deferred services cost		(220	)		(220	)		(293	)
	Stock-based compensation		71,608			71,608			52,015
	Amortization of acquired intangible assets included in cost of revenue		20,432			20,432			20,029
	Amortization of acquired intangible assets		17,786			17,786			23,566
	Acquisition-related and other transactional charges included in general and administrative costs		1,215			1,215			1,718
	Restructuring and other charges, net		45,464			45,464			1,846
	Income tax adjustments ⁽²⁾		403			(20,857	)		(20,738	)
Non-GAAP net income		$	119,997		$	154,946		$	117,911

GAAP diluted earnings (loss) per share		$	(0.32	)	$	0.16		$	0.33
	Fair value adjustment of acquired deferred revenue		0.01			0.01			0.01
	Stock-based compensation		0.60			0.60			0.44
	Amortization of acquired intangibles		0.32			0.32			0.37
	Acquisition-related and other transactional charges		0.01			0.01			0.01
	Restructuring and other charges, net		0.38			0.38			0.02
	Income tax adjustments		-			(0.18	)		(0.18	)
Non-GAAP diluted earnings per share		$	1.01		$	1.31		$	1.00

GAAP diluted weighted average shares outstanding			117,636			118,664			117,687
	Dilutive effect of stock-based compensation plans		1,028			-			-
Non-GAAP diluted weighted average shares outstanding			118,664			118,664			117,687

	(1) Operating margin impact of non-GAAP adjustments:
		Nine Months Ended
		June 29,			June 29,			June 30,
		2019			2019			2018
		ASC 606			ASC 605			ASC 605
	GAAP operating margin		1.8	%		6.6	%		6.6	%
	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		7.8	%		7.3	%		5.6	%
	Amortization of acquired intangibles		4.2	%		3.9	%		4.7	%
	Acquisition-related and other transactional charges		0.1	%		0.1	%		0.2	%
	Restructuring and other charges, net		5.0	%		4.7	%		0.2	%
	Non-GAAP operating margin		18.8	%		22.6	%		17.3	%

	(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 also excluded a tax charge of $0.9M relating to the change in the functional currency of a wholly owned foreign subsidiary.

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


	June 29,		June 29,		September 30,
	2019		2019		2018
	ASC 606 ⁽¹⁾⁽²⁾		ASC 605		ASC 605

ASSETS

Cash and cash equivalents	$	267,862	$	267,862	$	259,946
Marketable securities		54,626		54,626		55,951
Accounts receivable, net		321,426		111,165		129,297
Property and equipment, net		107,752		107,752		80,613
Goodwill and acquired intangible assets, net		1,428,423		1,428,423		1,382,659
Other assets		468,500		478,928		420,556

Total assets	$	2,648,589	$	2,448,756	$	2,329,022

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue	$	382,579	$	550,933	$	499,442
Debt, net of deferred issuance costs		698,916		698,916		643,268
Other liabilities		351,499		292,409		311,723
Stockholders' equity		1,215,595		906,498		874,589

Total liabilities and stockholders' equity	$	2,648,589	$	2,448,756	$	2,329,022

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