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PTC Announces Fiscal Fourth Quarter 2019 Results; Provides Fiscal 2020 Outlook

October 23, 2019

BOSTON--(BUSINESS WIRE)--Oct 23, 2019--

PTC (NASDAQ: PTC) today reported financial results for its fiscal fourth quarter and fiscal year ended September 30, 2019.

James Heppelmann, President and CEO said “PTC’s ARR grew 12% in fiscal 2019 reflecting the strength of our technology in the markets we serve and the value we provide to our customers. We also successfully completed the transition to subscription licensing and ended the year strong across key financial metrics including revenue and margins.”

Heppelmann added, “Today, we also announced PTC’s intention to acquire Onshape, creators of the first SaaS product development platform that unites next-generation CAD, data management, and collaboration tools. Onshape’s proven talent and technology are the perfect complement to PTC’s market leading on-premise CAD and PLM solutions, and will dramatically strengthen PTC’s ability to participate in the highest growth part of the market with a unique SaaS-based product offering. Most importantly, Onshape will put PTC in a position to lead the market’s inevitable shift to SaaS.”

Fourth quarter and fiscal year 2019 highlights 1
Additional operating and financial highlights are set forth below. For additional details, please refer to the prepared remarks and financial data tables that have been posted to the Investor Relations section of our website at investor@ptc.com. Note that all references to revenue and margins are under ASC 605.

Fiscal 2020 Operational Outlook
Our fiscal 2020 operational outlook includes the following general considerations :

 

 

In millions

Operating Metrics

ARR

$1,245 - $1,280

YoY in CC

12% - 15%

Free cash flow

$218-$238

YoY in CC

(1%) - 8%

Adjusted free cash flow

$255-$275

YoY in CC

4% - 12%

Fiscal 2020 Financial Outlook
Our fiscal 2020 financial outlook includes the following general considerations :

For fiscal year ending September 30, 2020, the company expects:

 

 

 

In millions except per share amounts

 

GAAP

Non-GAAP (1)

Revenue

 

$1,410-$1,510

$1,410-$1,510

Effective tax rate

 

20%

19%

Diluted shares outstanding

 

116

116

Diluted earnings per share

 

$0.59-$1.22

$1.95-$2.60

(1) The FY’20 non-GAAP revenue and non-GAAP EPS guidance exclude the estimated items outlined in the table below, as well as any tax effects and discrete tax items (which are not known nor reflected).

 

In millions

 

 

FY’20

 

 

 

 

Restructuring charges

 

 

$25

Intangible asset amortization expense

 

 

$49

Stock-based compensation expense

 

 

$119

Total Estimated Pre-Tax GAAP adjustments

 

 

$193

Estimates for the effect of acquisition accounting on fair value of acquired deferred revenue, intangible amortization and acquisition-related charges related primarily to the Onshape acquisition are not reflected in the FY’20 revenue and EPS guidance table above.

PTC’s Fiscal Fourth Quarter Results Conference Call, Prepared Remarks and Data Tables
Prepared remarks and financial data tables have been posted to the Investor Relations section of our website at ptc.com. The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, October 23, 2019. To access the live webcast, please visit PTC’s Investor Relations website at investor.ptc.com at least 15 minutes before the scheduled start time to download any necessary audio or plug-in software. To participate in the live conference call, dial 773-799-3757 or 800-857-5592 and provide the passcode PTC. The call will be recorded, and a replay will be available for 10 days following the call by dialing 800-873-2012 and entering the passcode 9752. The archived webcast will also be available on PTC’s Investor Relations website.

 
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 
 
Three Months Ended
September 30,September 30,September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606ASC 605ASC 605
 
Revenue:
Subscription license

$

84,936

 

Subscription support & cloud services

 

97,641

 

Total Subscription

 

182,577

 

$

185,483

 

$

142,376

 

Perpetual support

 

100,007

 

 

98,577

 

 

117,819

 

Total recurring revenue

 

282,584

 

 

284,060

 

 

260,195

 

Perpetual license

 

9,347

 

 

8,530

 

 

27,030

 

Total software revenue

 

291,931

 

 

292,590

 

 

287,225

 

Professional services

 

43,073

 

 

42,238

 

 

25,296

 

Total revenue (1)

 

335,004

 

 

334,828

 

 

312,521

 

 
Cost of revenue: (2) (3)
Cost of software revenue

 

48,813

 

 

48,415

 

 

43,765

 

Cost of professional services revenue

 

36,604

 

 

35,343

 

 

34,361

 

Total cost of revenue

 

85,417

 

 

83,758

 

 

78,126

 

 
Gross margin

 

249,587

 

 

251,070

 

 

234,395

 

 
Operating expenses: (2)(3)
Sales and marketing

 

101,307

 

 

111,701

 

 

109,198

 

Research and development

 

64,113

 

 

64,113

 

 

62,396

 

General and administrative

 

25,911

 

 

25,911

 

 

41,558

 

Amortization of acquired intangible assets

 

6,055

 

 

6,055

 

 

7,784

 

Restructuring and other charges, net

 

5,650

 

 

5,650

 

 

1,918

 

Total operating expenses

 

203,036

 

 

213,430

 

 

222,854

 

 
Operating income

 

46,551

 

 

37,640

 

 

11,541

 

Other expense, net (3)

 

(12,767

)

 

(12,790

)

 

(10,872

)

Income before income taxes

 

33,784

 

 

24,850

 

 

669

 

Provision (benefit) for income taxes (4)

 

23,958

 

 

40,794

 

 

(12,522

)

Net income (loss)

$

9,826

 

$

(15,944

)

$

13,191

 

 
Earnings (loss) per share:
Basic

$

0.09

 

$

(0.14

)

$

0.11

 

Weighted average shares outstanding

 

115,025

 

 

115,025

 

 

117,823

 

 
Diluted

$

0.08

 

$

(0.14

)

$

0.11

 

Weighted average shares outstanding

 

115,897

 

 

115,025

 

 

119,580

 

 
 

(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 tax provision for the fourth quarter of 2019 is based on estimates that are subject to final review.
 
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 
 
Twelve Months Ended
September 30,September 30,September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606ASC 605ASC 605
 
Revenue:
Subscription license

$

253,698

 

Subscription support & cloud services

 

348,452

 

Total Subscription

 

602,150

 

$

667,597

 

$

482,027

 

Perpetual support

 

415,248

 

 

411,030

 

 

496,826

 

Total recurring revenue

 

1,017,398

 

 

1,078,627

 

 

978,853

 

Perpetual license

 

70,702

 

 

72,191

 

 

109,634

 

Total software revenue

 

1,088,100

 

 

1,150,818

 

 

1,088,487

 

Professional services

 

167,531

 

 

160,676

 

 

153,337

 

Total revenue (1)

 

1,255,631

 

 

1,311,494

 

 

1,241,824

 

 
Cost of revenue: (2)(3)
Cost of software revenue

 

185,414

 

 

183,218

 

 

182,843

 

Cost of professional services revenue

 

139,964

 

 

134,936

 

 

143,659

 

Total cost of revenue

 

325,378

 

 

318,154

 

 

326,502

 

 
Gross margin

 

930,253

 

 

993,340

 

 

915,322

 

 
Operating expenses: (2)(3)
Sales and marketing

 

417,449

 

 

441,958

 

 

414,764

 

Research and development

 

246,888

 

 

246,888

 

 

249,786

 

General and administrative

 

127,919

 

 

127,919

 

 

143,045

 

Amortization of acquired intangible assets

 

23,841

 

 

23,841

 

 

31,350

 

Restructuring and other charges, net

 

51,114

 

 

51,114

 

 

3,764

 

Total operating expenses

 

867,211

 

 

891,720

 

 

842,709

 

 
Operating income

 

63,042

 

 

101,620

 

 

72,613

 

Other expense, net (3)

 

(42,742

)

 

(42,916

)

 

(43,957

)

Income before income taxes

 

20,300

 

 

58,704

 

 

28,656

 

Provision (benefit) for income taxes (4)

 

47,760

 

 

55,725

 

 

(23,331

)

Net income (loss)

$

(27,460

)

$

2,979

 

$

51,987

 

 
Earnings (loss) per share:
Basic

$

(0.23

)

$

0.03

 

$

0.45

 

Weighted average shares outstanding

 

117,724

 

 

117,724

 

 

116,390

 

 
Diluted

$

(0.23

)

$

0.03

 

$

0.44

 

Weighted average shares outstanding

 

117,724

 

 

118,714

 

 

118,158

 

 
 

(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 tax provision for fiscal 2019 is based on estimates that are subject to final review. Our 2018 year-to-date tax rate includes a benefit of $12 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
September 30,September 30,September 30,

2019

2019

2018

ASC 606ASC 605ASC 605
License revenue (1)

$

94,283

$

173,514

$

152,675

Support and cloud services revenue

 

197,648

 

119,076

 

134,550

Professional services revenue

 

43,073

 

42,238

 

25,296

Total revenue

$

335,004

$

334,828

$

312,521

 
Twelve Months Ended
September 30,September 30,September 30,

2019

2019

2018

ASC 606ASC 605ASC 605
License revenue (1)

$

324,400

$

666,770

$

529,265

Support and cloud services revenue

 

763,700

 

484,048

 

559,222

Professional services revenue

 

167,531

 

160,676

 

153,337

Total revenue

$

1,255,631

$

1,311,494

$

1,241,824

 
(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
September 30,September 30,September 30,

2019

2019

2018

ASC 606ASC 605ASC 605
Cost of software revenue

$

1,791

$

1,791

$

1,180

Cost of professional services revenue

 

1,361

 

1,361

 

2,233

Sales and marketing

 

6,912

 

6,912

 

10,066

Research and development

 

7,168

 

7,168

 

3,862

General and administrative

 

(2,440)

 

(2,440)

 

13,583

Total stock-based compensation

$

14,792

$

14,792

$

30,924

 
Twelve Months Ended
September 30,September 30,September 30,

 

2019

 

2019

 

2018

ASC 606ASC 605ASC 605
Cost of software revenue

$

5,513

$

5,513

$

4,446

Cost of professional services revenue

 

6,426

 

6,426

 

7,079

Sales and marketing

 

32,026

 

32,026

 

24,893

Research and development

 

22,019

 

22,019

 

13,488

General and administrative

 

20,416

 

20,416

 

33,033

Total stock-based compensation

$

86,400

$

86,400

$

82,939

 
 
PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
 
Three Months Ended
September 30,September 30,September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606ASC 605ASC 605
 
GAAP revenue

$

335,004

 

$

334,828

 

$

312,521

 

Fair value adjustment of acquired deferred subscription revenue

 

-

 

 

-

 

 

75

 

Fair value adjustment of acquired deferred services revenue

 

192

 

 

192

 

 

223

 

Settlement adjustment - subscription revenue (2)

 

-

 

 

-

 

 

(5,250

)

Settlement adjustment - services revenue (2)

 

-

 

 

-

 

 

14,546

 

Non-GAAP revenue

$

335,196

 

$

335,020

 

$

322,115

 

 
GAAP gross margin

$

249,587

 

$

251,070

 

$

234,395

 

Fair value adjustment of acquired deferred revenue

 

192

 

 

192

 

 

298

 

Settlement adjustment - revenue (2)

 

-

 

 

-

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(88

)

 

(88

)

 

(91

)

Stock-based compensation

 

3,152

 

 

3,152

 

 

3,413

 

Amortization of acquired intangible assets included in cost of revenue

 

6,874

 

 

6,874

 

 

6,677

 

Non-GAAP gross margin

$

259,717

 

$

261,200

 

$

253,988

 

 
GAAP operating income

$

46,551

 

$

37,640

 

$

11,541

 

Fair value adjustment of acquired deferred revenue

 

192

 

 

192

 

 

298

 

Settlement adjustment - revenue (2)

 

-

 

 

-

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(88

)

 

(88

)

 

(91

)

Stock-based compensation

 

14,792

 

 

14,792

 

 

30,924

 

Amortization of acquired intangible assets included in cost of revenue

 

6,874

 

 

6,874

 

 

6,677

 

Amortization of acquired intangible assets

 

6,055

 

 

6,055

 

 

7,784

 

Acquisition-related and other transactional charges included in general and administrative costs

 

1,895

 

 

1,895

 

 

135

 

Restructuring and other charges, net

 

5,650

 

 

5,650

 

 

1,918

 

Non-GAAP operating income (1)

$

81,921

 

$

73,010

 

$

68,482

 

 
GAAP net income (loss)

$

9,826

 

$

(15,944

)

$

13,191

 

Fair value adjustment of acquired deferred revenue

 

192

 

 

192

 

 

298

 

Settlement adjustment - revenue (2)

 

-

 

 

-

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(88

)

 

(88

)

 

(91

)

Stock-based compensation

 

14,792

 

 

14,792

 

 

30,924

 

Amortization of acquired intangible assets included in cost of revenue

 

6,874

 

 

6,874

 

 

6,677

 

Amortization of acquired intangible assets

 

6,055

 

 

6,055

 

 

7,784

 

Acquisition-related and other transactional charges included in general and administrative costs

 

1,895

 

 

1,895

 

 

135

 

Restructuring and other charges, net

 

5,650

 

 

5,650

 

 

1,918

 

Income tax adjustments (3)

 

29,317

 

 

32,673

 

 

(16,843

)

Non-GAAP net income

$

74,513

 

$

52,099

 

$

53,289

 

 
GAAP diluted earnings (loss) per share

$

0.08

 

$

(0.14

)

$

0.11

 

Fair value adjustment of acquired deferred revenue

 

-

 

 

-

 

 

-

 

Settlement adjustment - revenue (2)

 

-

 

 

-

 

 

0.08

 

Stock-based compensation

 

0.13

 

 

0.13

 

 

0.26

 

Amortization of acquired intangibles

 

0.11

 

 

0.11

 

 

0.12

 

Acquisition-related and other transactional charges

 

0.02

 

 

0.02

 

 

-

 

Restructuring and other charges, net

 

0.05

 

 

0.05

 

 

0.02

 

Income tax adjustments

 

0.25

 

 

0.28

 

 

(0.14

)

Non-GAAP diluted earnings per share

$

0.64

 

$

0.45

 

$

0.45

 

 
GAAP diluted weighted average shares outstanding

 

115,897

 

 

115,025

 

 

119,580

 

Dilutive effect of stock-based compensation plans

 

-

 

 

872

 

 

-

 

Non-GAAP diluted weighted average shares outstanding

 

115,897

 

 

115,897

 

 

119,580

 

 

(1

)

Operating margin impact of non-GAAP adjustments:
Three Months Ended
September 30,September 30,September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606ASC 605ASC 605
GAAP operating margin

 

13.9

%

 

11.2

%

 

3.7

%

Fair value adjustment of acquired deferred revenue

 

0.1

%

 

0.1

%

 

0.1

%

Settlement adjustment - revenue (2)

 

0.0

%

 

0.0

%

 

2.4

%

Fair value adjustment to deferred services cost

 

0.0

%

 

0.0

%

 

0.0

%

Stock-based compensation

 

4.4

%

 

4.4

%

 

9.9

%

Amortization of acquired intangibles

 

3.9

%

 

3.9

%

 

4.6

%

Acquisition-related and other transactional charges

 

0.6

%

 

0.6

%

 

0.0

%

Restructuring and other charges, net

 

1.7

%

 

1.7

%

 

0.6

%

Non-GAAP operating margin

 

24.4

%

 

21.8

%

 

21.3

%

 

(2

)

Our Q4'18 and FY'18 GAAP revenue results include the impact of a settlement of a customer dispute concerning a professional services receivable. The settlement, reached in September 2018, included partial payment of the receivable and new software purchases. The net revenue write-down recorded in the fourth quarter of 2018 was $9.3 million, comprised of a $14.5 million services revenue write-down, partially offset by new subscription revenue of $5.2 million. We have excluded these amounts from our Non-GAAP results.

(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 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. The fourth quarter of 2018 excludes the GAAP benefit of a $3 million valuation allowance release in a foreign jurisdiction as the jurisdiction was profitable on a non-GAAP basis.
PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
 
Twelve Months Ended
September 30,September 30,September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606ASC 605ASC 605
 
GAAP revenue

$

1,255,631

 

$

1,311,494

 

$

1,241,824

 

Fair value adjustment of acquired deferred subscription revenue

 

66

 

 

66

 

 

341

 

Fair value adjustment of acquired deferred services revenue

 

721

 

 

721

 

 

929

 

Settlement adjustment - subscription revenue (2)

 

-

 

 

-

 

 

(5,250

)

Settlement adjustment - services revenue (2)

 

-

 

 

-

 

 

14,546

 

Non-GAAP revenue

$

1,256,418

 

$

1,312,281

 

$

1,252,390

 

 
GAAP gross margin

$

930,253

 

$

993,340

 

$

915,322

 

Fair value adjustment of acquired deferred revenue

 

787

 

 

787

 

 

1,270

 

Settlement adjustment - revenue (2)

 

-

 

 

-

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(308

)

 

(308

)

 

(384

)

Stock-based compensation

 

11,939

 

 

11,939

 

 

11,525

 

Amortization of acquired intangible assets included in cost of revenue

 

27,306

 

 

27,306

 

 

26,706

 

Non-GAAP gross margin

$

969,977

 

$

1,033,064

 

$

963,735

 

 
GAAP operating income

$

63,042

 

$

101,620

 

$

72,613

 

Fair value adjustment of acquired deferred revenue

 

787

 

 

787

 

 

1,270

 

Settlement adjustment - revenue (2)

 

-

 

 

-

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(308

)

 

(308

)

 

(384

)

Stock-based compensation

 

86,400

 

 

86,400

 

 

82,939

 

Amortization of acquired intangible assets included in cost of revenue

 

27,306

 

 

27,306

 

 

26,706

 

Amortization of acquired intangible assets

 

23,841

 

 

23,841

 

 

31,350

 

Acquisition-related and other transactional charges included in general and administrative costs

 

3,110

 

 

3,110

 

 

1,853

 

Restructuring and other charges, net

 

51,114

 

 

51,114

 

 

3,764

 

Non-GAAP operating income (1)

$

255,292

 

$

293,870

 

$

229,407

 

 
GAAP net income (loss)

$

(27,460

)

$

2,979

 

$

51,987

 

Fair value adjustment of acquired deferred revenue

 

787

 

 

787

 

 

1,270

 

Settlement adjustment - revenue (2)

 

-

 

 

-

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(308

)

 

(308

)

 

(384

)

Stock-based compensation

 

86,400

 

 

86,400

 

 

82,939

 

Amortization of acquired intangible assets included in cost of revenue

 

27,306

 

 

27,306

 

 

26,706

 

Amortization of acquired intangible assets

 

23,841

 

 

23,841

 

 

31,350

 

Acquisition-related and other transactional charges included in general and administrative costs

 

3,110

 

 

3,110

 

 

1,853

 

Restructuring and other charges, net

 

51,114

 

 

51,114

 

 

3,764

 

Income tax adjustments (3)

 

29,719

 

 

11,816

 

 

(37,581

)

Non-GAAP net income

$

194,509

 

$

207,045

 

$

171,200

 

 
GAAP diluted earnings (loss) per share

$

(0.23

)

$

0.03

 

$

0.44

 

Fair value adjustment of acquired deferred revenue

 

0.01

 

 

0.01

 

 

0.01

 

Settlement adjustment - revenue (2)

 

-

 

 

-

 

 

0.08

 

Stock-based compensation

 

0.73

 

 

0.73

 

 

0.70

 

Amortization of acquired intangibles

 

0.43

 

 

0.43

 

 

0.49

 

Acquisition-related and other transactional charges

 

0.03

 

 

0.03

 

 

0.02

 

Restructuring and other charges, net

 

0.43

 

 

0.43

 

 

0.03

 

Income tax adjustments

 

0.25

 

 

0.10

 

 

(0.32

)

Non-GAAP diluted earnings per share

$

1.64

 

$

1.74

 

$

1.45

 

 
GAAP diluted weighted average shares outstanding

 

117,724

 

 

118,714

 

 

118,158

 

Dilutive effect of stock-based compensation plans

 

990

 

 

-

 

 

-

 

Non-GAAP diluted weighted average shares outstanding

 

118,714

 

 

118,714

 

 

118,158

 

 

(1

)

Operating margin impact of non-GAAP adjustments:
Twelve Months Ended
September 30,September 30,September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606ASC 605ASC 605
GAAP operating margin

 

5.0

%

 

7.7

%

 

5.8

%

Fair value adjustment of acquired deferred revenue

 

0.1

%

 

0.1

%

 

0.1

%

Settlement adjustment - revenue (2)

 

0.0

%

 

0.0

%

 

0.6

%

Fair value adjustment to deferred services cost

 

0.0

%

 

0.0

%

 

0.0

%

Stock-based compensation

 

6.9

%

 

6.6

%

 

6.7

%

Amortization of acquired intangibles

 

4.1

%

 

3.9

%

 

4.7

%

Acquisition-related and other transactional charges

 

0.2

%

 

0.2

%

 

0.1

%

Restructuring and other charges, net

 

4.1

%

 

3.9

%

 

0.3

%

Non-GAAP operating margin

 

20.3

%

 

22.4

%

 

18.3

%

 

(2

)

Our Q4'18 and FY'18 GAAP revenue results include the impact of a settlement of a customer dispute concerning a professional services receivable. The settlement, reached in September 2018, included partial payment of the receivable and new software purchases. The net revenue write-down recorded in the fourth quarter of 2018 was $9.3 million, comprised of a $14.5 million services revenue write-down, partially offset by new subscription revenue of $5.2 million. We have excluded these amounts from our Non-GAAP results.

(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 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. The fourth quarter of 2018 excludes the GAAP benefit of a $3 million valuation allowance release in a foreign jurisdiction as the jurisdiction was profitable on a non-GAAP basis and a non-cash benefit of approximately $12 million related to the enactment of the Tax Cuts and Jobs Act.
PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (1)
(in thousands)
 
 
September 30,September 30,September 30,

2019

2019

2018

ASC 606 (2)ASC 605ASC 605
 
ASSETS
 
Cash and cash equivalents

$

 

269,579

$

 

269,579

$

 

259,946

Marketable securities

 

57,435

 

57,435

 

55,951

Accounts receivable, net

 

372,743

 

107,921

 

129,297

Property and equipment, net

 

105,531

 

105,531

 

80,613

Goodwill and acquired intangible assets, net

 

1,408,128

 

1,408,128

 

1,382,659

Other assets

 

452,600

 

523,314

 

420,556

 
Total assets

$

 

2,666,016

$

 

2,471,908

$

 

2,329,022

 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Deferred revenue

$

 

396,632

$

 

578,748

$

 

499,442

Debt, net of deferred issuance costs

 

669,134

 

669,134

 

643,268

Other liabilities

 

398,252

 

347,693

 

311,723

Stockholders' equity

 

1,201,998

 

876,333

 

874,589

 
Total liabilities and stockholders' equity

$

 

2,666,016

$

 

2,471,908

$

 

2,329,022

 
 

(1

)

Our consolidated balance sheet as of September 30, 2019 under ASC 606 is preliminary, pending final adjustments required as a result of our adoption of ASC 606. In addition, the tax balances are based on estimates that are subject to final review. We expect the adjustments to be finalized prior to the filing of our Form 10-K for fiscal 2019.

(2

)

The adoption of ASC 606 resulted in up front license recognition under our subscription contracts, resulting in unbilled receivables, and an increase in receivables previously included in other current assets under ASC 605 related to billed but uncollected support and subscription receivables that had corresponding deferred revenue. The adoption also resulted in a decrease in deferred revenue primarily due to the up front license recognition to accumulated deficit at the time of adoption related to on-premise subscription software licenses.
PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
 
Three Months EndedTwelve Months Ended
September 30,September 30,September 30,September 30,

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 
Cash flows from operating activities:
Net income (loss)

$

9,826

 

$

13,191

 

$

(27,460

)

$

51,987

 

Stock-based compensation

 

14,792

 

 

30,924

 

 

86,400

 

 

82,939

 

Depreciation and amortization

 

19,190

 

 

22,105

 

 

77,824

 

 

87,408

 

Accounts receivable

 

(58,808

)

 

(799

)

 

29,446

 

 

20,396

 

Accounts payable and accruals

 

23,420

 

 

37,150

 

 

4,102

 

 

(1,737

)

Deferred revenue

 

20,550

 

 

(26,653

)

 

45,875

 

 

56,141

 

Income taxes

 

14,717

 

 

(16,228

)

 

1,940

 

 

(46,233

)

Other (1)

 

11,529

 

 

2,270

 

 

67,018

 

 

(3,149

)

Net cash provided by operating activities (4)

 

55,216

 

 

61,960

 

 

285,145

 

 

247,752

 

 
Capital expenditures

 

(4,832

)

 

(17,375

)

 

(64,411

)

 

(36,041

)

Acquisition of businesses, net of cash acquired (2)

 

-

 

 

-

 

 

(86,737

)

 

(3,000

)

Purchase of intangible asset

 

-

 

 

-

 

 

-

 

 

(3,000

)

Borrowings (payments) on debt, net

 

(30,000

)

 

(50,000

)

 

25,000

 

 

(70,000

)

Net proceeds associated with issuance of common stock (3)

 

8,817

 

 

1,008,182

 

 

12,975

 

 

1,015,654

 

Repurchases of common stock (3)

 

(24,999

)

 

(1,000,000

)

 

(114,994

)

 

(1,100,000

)

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

 

(175

)

 

(577

)

 

(44,366

)

 

(45,374

)

Proceeds from (purchase of) investments

 

-

 

 

-

 

 

(7,500

)

 

(1,000

)

Contingent consideration

 

-

 

 

(525

)

 

(1,575

)

 

(8,275

)

Purchases of marketable securities, net

 

(2,778

)

 

(1,748

)

 

(1,051

)

 

(6,171

)

Other financing & investing activities

 

5,166

 

 

(2,851

)

 

9,675

 

 

(2,851

)

Foreign exchange impact on cash

 

(4,708

)

 

(4,201

)

 

(2,565

)

 

(7,810

)

 
Net change in cash, cash equivalents, and restricted cash (1)

 

1,707

 

 

(7,135

)

 

9,596

 

 

(20,116

)

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

 

268,982

 

 

268,228

 

 

261,093

 

 

281,209

 

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

$

270,689

 

$

261,093

 

$

270,689

 

$

261,093

 

 
 

(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 $0.5 million increase and $0.1 million increase related to the change in restricted cash from the change in other current assets for the three months and twelve months ended September 30, 2018, respectively.

(2

)

On December 29, 2018, we acquired Frustum for $70 million, net of cash acquired.

(3

)

In the fourth quarter of 2018, Rockwell Automation made a $1.0 billion equity investment in PTC as part of a strategic alliance. Using the cash proceeds from this investment, PTC entered into a $1.0 billion accelerated share repurchase.

(4

)

Our consolidated cash flows as of September 30, 2019 are preliminary, pending final balance sheet adjustments required as a result of our adoption of ASC 606. In addition, our tax balances are based on estimates that are subject to final review. Any adjustments 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-K for fiscal year 2019.
 
 

Important Disclosures

Important Information About Our Operating and Non-GAAP Financial Measures
PTC provides non-GAAP supplemental information to its financial results. We use these non-GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our operating results. We believe that these non-GAAP measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. We believe that providing non-GAAP measures affords investors a view of our operating results that may be more easily compared to the results of peer companies. In addition, compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. However, non-GAAP information should not be construed as an alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on our financial results and such items often recur. Management uses, and investors should consider, non-GAAP measures in conjunction with our GAAP results.

Non-GAAP revenue, 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: fair value of acquired deferred revenue, fair value adjustment to deferred services cost, stock-based compensation, amortization of acquired intangible assets, acquisition-related and other transactional charges included in general and administrative costs, restructuring and headquarters relocation 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” of our Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

Free Cash Flow and Adjusted Free Cash Flow - PTC also provides information on “free cash flow” and “adjusted 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 goal of returning approximately 50% of our free cash flow to shareholders via stock repurchases. Free cash flow is net cash provided by (used in) operating activities less capital expenditures; adjusted free cash flow is free cash flow excluding restructuring payments and certain identified non-ordinary course payments. Free cash flow and adjusted free cash flow are not measures of cash available for discretionary expenditures.

Constant Currency Change Metric - Year-over-year changes in revenue and bookings on a constant currency basis compare reported results excluding the effect of any hedging converted into U.S. dollars based on the corresponding prior year’s foreign currency exchange rates to reported results for the comparable prior year period.

Operating Measures

ARR
To help investors understand and assess the success of our subscription transition, we provide an ARR operating measure. On September 5, 2019, we revised the ARR definition. ARR represents the annualized value of our portfolio of recurring customer arrangements as of the end of the reporting period, including subscription software, cloud, and support contracts. This is a change from our prior definition where ARR for a quarter was calculated by dividing the portion of non-GAAP software revenue attributable to subscription and support under ASC 605 for the quarter by the number of days in the quarter and multiplying by 365.

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 new customers, existing customer expansions and includes the impact of churn (gross churn net of pricing).

Because this measure represents the annualized value of recurring customer contracts as of the end of a reporting period, ARR does not represent revenue for any particular period or remaining revenue that will be recognized in future periods.

New Subscription Annualized Contract Value (ACV)
New subscription ACV includes new subscription and support ARR from existing customer expansions and from new customers.

Churn
Churn is gross churn net of pricing, it does not include upsell and cross sell.

Cash Generation
Cash generation is ARR plus perpetual license revenue and professional services revenue.

Cost of Revenue
Cost of revenue includes cost of license, cost of support and cloud services, and cost of professional services.

Software Revenue
Any reference to “total recurring software revenue” or “recurring software revenue” means the sum of subscription revenue and support revenue. Any reference to “total software revenue” or “software revenue” means the sum of subscription revenue, support revenue and perpetual license revenue. “Subscription revenue” includes cloud services revenue.

Navigate Allocation
Revenue and bookings for the Navigate™ ThingWorx-based IoT solution for PLM are allocated 50% to Solutions and 50% to IoT.

Foreign Currency Impacts on our Business
We have a global business, with Europe and Asia historically representing approximately 60% of our revenue, and fluctuation in foreign currency exchange rates can significantly impact our results. We do not forecast currency movements; rather we provide detailed constant currency commentary.

Bookings Metrics
On Sept 5, 2019 we announced a revision to our reporting measures. We will no longer provide bookings but instead will provide ARR, which we believe provides a more comprehensive view of a subscription business. We offer both perpetual and subscription licensing options to our customers, as well as monthly software rentals for certain products. Given the difference in revenue recognition between the sale of a perpetual software license and a subscription, we use bookings for internal planning, forecasting and reporting of new license and cloud services transaction (as subscription bookings includes cloud services bookings).

In order to normalize between perpetual and subscription licenses, we define subscription bookings as the subscription annualized contract value (subscription ACV) of new subscription contracts multiplied by a conversion factor of 2. We arrived at the conversion factor of 2 by considering a number of variables including pricing, support, length of term, and renewal rates. We define subscription ACV as the total value of a new subscription contract (which may include annual values that increase over time) divided by the term of the contract (in days) multiplied by 365. If the term of the subscription contract is less than a year, and is not associated with an existing contract, the booking is equal to the total contract value. Beginning in Q3’18, minimum ACV commitments under our Strategic Alliance Agreement with Rockwell Automation are included in subscription ACV if the period-to-date minimum ACV commitment exceeds actual ACV sold under the Agreement.

License and subscription bookings equal subscription bookings (as described above) plus perpetual license bookings. Because subscription bookings is a metric we use to approximate the value of subscription sales if sold as perpetual licenses, it does not represent the actual revenue that will be recognized with respect to subscription sales or that would be recognized if the sales were perpetual licenses, nor does the annualized value of monthly software rental bookings represent the value of any such booking.

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 deteriorate due to, among other factors, the geopolitical environment, including the focus on technology transactions with non-U.S. entities and potential expanded prohibitions, and ongoing trade tensions and tariffs; our businesses, including our Internet of Things (IoT) and Augmented Reality businesses, may not expand and/or generate the revenue we expect if customers are slower to adopt those technologies than we expect or adopt competing technologies; bookings associated with minimum ACV commitments under our Strategic Alliance Agreement with Rockwell Automation may not result in subscription contracts sold through to end-user customers; the Onshape acquisition may not close when or as we expect and may not provide the competitive benefit we expect; we may be unable to generate sufficient operating cash flow to repay the Onshape debt when or as we expect or to return 50% of free cash flow to shareholders and other uses of cash or our credit facility limits or other matters could preclude such repayments or share repurchases; we may be unable to expand our outstanding credit facility as we expect, which could adversely affect our liquidity and our credit rating; we may be unable to expand our partner ecosystem as we expect; and our partners may not generate the revenue 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 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@PTCBlogs

View source version on businesswire.com:https://www.businesswire.com/news/home/20191023005837/en/

CONTACT: PTC Investor Relations Contacts

Tim Fox

tifox@ptc.comNoelle Faris

nfaris@ptc.com

KEYWORD: UNITED STATES NORTH AMERICA MASSACHUSETTS

INDUSTRY KEYWORD: SUPPLY CHAIN MANAGEMENT ELECTRONIC DESIGN AUTOMATION DATA MANAGEMENT RETAIL TECHNOLOGY SOFTWARE

SOURCE: PTC

Copyright Business Wire 2019.

PUB: 10/23/2019 04:09 PM/DISC: 10/23/2019 04:09 PM

http://www.businesswire.com/news/home/20191023005837/en