Blueprint
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 OR 15(D) of The Securities Exchange Act of 1934
 
 
Date of report (Date of earliest event reported)                                                                                                                      April 16, 2019
 
PTC Inc.
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
Massachusetts
0-18059
04-2866152
(State or Other Jurisdiction
of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)
 
 
121 Seaport Boulevard, Boston, MA
02210
(Address of Principal Executive Offices)
(Zip Code)
 
 
(Registrant’s Telephone Number, Including Area Code)                                                                                                 (781) 370-5000
Securities Registered pursuant to Section 12(b) of the Act:
 
Title of each class
Trading Symbols
Name of each exchange on which registered
Common Stock, $.01 par value per share
PTC
NASDAQ Global Select Market
 
 
 
 
(Former Name or Former Address, if Changed Since Last Report)
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
 
 
 
Section 2 – Financial Information
 
Item 2.02.                       
Results of Operations and Financial Condition.
 
On April 24, 2019, PTC Inc. announced its financial results for its second quarter ended March 30, 2019. PTC also posted a copy of its supplemental prepared remarks about the completed first quarter on the Investor Relations section of its website at www.ptc.com. Copies of the press release and the prepared remarks are furnished herewith as Exhibits 99.1 and 99.2, respectively.
 
 
Section 5 – Corporate Governance and Management
 
Item 5.02. 
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
 
Appointment of New Chief Financial Officer
 
On April 24, 2019, PTC announced the April 16, 2019 appointment of Kristian Talvitie as PTC’s Executive Vice President, Chief Financial Officer effective May 15, 2019.
 
Kristian Talvitie, age 49, has been the Chief Financial Officer of Syncsort Incorporated, a private software company specializing in Big Data, high speed sorting products and data integration software and services since October 2018. He served as Chief Financial Officer of Sovos Compliance, LLC, a private SaaS software company specializing in tax compliance software from July 2016 to October 2018, and served as the Corporate Vice President, Finance of PTC from July 2013 to July 2016 and as the Senior Vice President, Financial Planning and Analysis and Investor Relations of PTC from November 2010 to July 2013.
 
Mr. Talvitie will be paid a base salary of $415,000 per year and he will be eligible to earn a performance-based bonus of up to $437,500 under PTC’s annual Corporate Incentive Plan. Mr. Talvitie will be granted restricted stock units with a target value of $2,235,000 on his start date. Half of the units are subject to performance measures established by the Compensation Committee and are eligible to vest in three substantially equal installments in November 2019, 2020 and 2021 to the extent the performance measures for the applicable periods are achieved. The other half of the units will be service-based and will vest in three substantially equal installments on each of November 15, 2019, November 15, 2020 and November 15, 2021. Mr. Talvitie will also receive a sign-on cash bonus of $200,000, which amount is recoverable by PTC on a pro-rata basis if he voluntarily resigns within one year.
 
Mr. Talvitie is also eligible to enter into an Executive Agreement with PTC that provides certain compensation and benefits if his employment is terminated under specified circumstances or if a change in control of PTC occurs, all on the same terms provided for PTC’s non-CEO executive officers generally.
 
Andrew Miller to Remain for Transition Period
 
Andrew Miller, our current Executive Vice President, Chief Financial Officer,  whose intention to retire we announced on January 23, 2019, will remain with PTC for an undetermined period to ensure a smooth transition of the role to Mr. Talvitie.
 
 
Section 9 – Financial Statements and Exhibits
 
Item 9.01.                       
Financial Statements and Exhibits.
 
(d)                 Exhibits.
 
99.1                  
PTC Inc. press release dated April 24, 2019.
 
99.2                  
Prepared remarks posted by PTC Inc. on April 24, 2019.
 
 
 
 
 
 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
PTC Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
Date: April 24, 2019
By:
/s/ Andrew Miller
 
 
 
Andrew Miller
 
 
 
Executive Vice President, Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 
Blueprint
  Exhibit 99.1
PTC ANNOUNCES SECOND QUARTER FISCAL YEAR 2019 RESULTS
 
Revenue, Operating Margin and EPS at or Above the High End of Guidance
 
BOSTON, MA, APRIL 24, 2019 - PTC (NASDAQ: PTC) today reported financial results for its fiscal second quarter 2019.
 
Financial Summary - ASC 606 (1)
 
Revenue of $290 million
GAAP net loss was $44 million or ($0.37) per diluted share; non-GAAP net income was $26 million or $0.22 per diluted share
GAAP operating margin of (8%); non-GAAP operating margin of 15%
 
Financial Summary ASC 605 (1)
 
Revenue of $315 million
GAAP net loss was $12 million or ($0.10) per diluted share; non-GAAP net income was $45 million or $0.38 per diluted share
GAAP operating margin of 0%; non-GAAP operating margin of 21%
 
(1)  We adopted ASC 606 on October 1, 2018, which impacted our reported financial results, including the timing and classification of revenue. For comparability purposes, and unless otherwise specified, the amounts included in the commentary below refer to results under ASC 605, as shown in our financial statements, including the notes thereto.
 
“We are pleased with our second quarter financial performance with revenue, margin and EPS at or above the high end of our guidance range,” said James Heppelmann, President and CEO, PTC. “Bookings growth of 18% year over year in constant currency was driven by a strong quarter for IoT, with IoT bookings growth well above the estimated 30-40% market growth rate. In the first quarter following the completion of our subscription business model transition, we were pleased to deliver Subscription bookings mix above 90%.”
 
Other second quarter 2019 results:
Additional operating and financial highlights are set forth below. Information about our bookings and other reporting measures (as updated) is provided 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.
 
Additional Operating Highlights: 
 
License and subscription bookings: Q2’19 license and subscription bookings were $112 million, an increase of 18% on a constant currency basis, driven by a strong quarter for IoT; for the first time IoT bookings surpassed both CAD and PLM in the quarter.
 
 
1
 
 
Software revenue: Q2’19 software revenue was $277 million, an increase of 6% year over year or 8% in constant currency.
 
Recurring Software revenue: Q2’19 software recurring revenue was $266 million, an increase of 11% year over year or 14% in constant currency.
 
IoT software revenue: Q2’19 IoT software revenue was $37 million, up 27% year over year or 30% on a constant currency basis, driven by 48% constant currency growth in subscription revenue.
 
Annualized recurring revenue (ARR): Q2’19 ARR was $1,065 million, a constant currency increase of 15% year over year and the ninth consecutive quarter of double-digit year-over-year growth.
 
Deferred revenue: Billed deferred revenue increased 11% year over year to $554 million. Total deferred revenue – billed and unbilled - increased $61 million year over year, despite a 400-basis point currency headwind. Billed Deferred Revenue primarily relates to software agreements invoiced to customers for which the revenue has not yet been recognized. Billed Deferred Revenue fluctuates quarterly based upon the contractual billing dates in our recurring revenue contracts, the timing of our fiscal reporting periods. Additionally, total Diferred Revenue is impacted by changes in FX rates and the length ofnew and renewal contracts.
 
Operating margin: GAAP operating margin in the second quarter was 0%, compared to 7% in the same period last year driven by restructuring charges associated with the relocation of our headquarters; non-GAAP operating margin was 21%, compared to 18% in the same period last year.
 
Operating cash flow and free cash flow: Operating cash flow in the second quarter was $141 million, up 27% over Q2’18, and free cash flow was $120 million, up 13% over Q2’18. Free cash flow in Q2’19 includes cash payments of approximately $10 million related to our restructuring plan, including the relocation of our headquarters.
 
Total cash, cash equivalents, and marketable securities: As of the end of the second quarter total cash, cash equivalents, and marketable securities was $351 million and total debt, net of deferred issuance costs, was $739 million. During the second quarter we used $65 million to repurchase 725,000 shares.
 
Restructuring: The restructuring charge in the second quarter related to exiting our headquarters in Needham was $27 million.
 
Management's 2019 Financial Outlook:
The Company's third quarter and fiscal year 2019 revenue and diluted earnings per share guidance is provided below. The revenue and diluted earnings per share guidance is provided on both a GAAP and a non-GAAP basis, and in accordance with both ASC 606 and ASC 605. Non-GAAP financial measures exclude the income statement effects of acquisition adjustments to deferred revenue, stock-based compensation, amortization of acquired intangible assets, acquisition-related transaction costs, restructuring charges and measurement-period adjustments related to the Tax Cuts and Jobs Act.
 
 
2
 
 
Fiscal 2019 Business Outlook – ASC 606
For the third quarter and fiscal year ending September 30, 2019, the company expects:
 
In millions except per share amounts
 
 
 
 
 
 
 
 
 
 
 
 
Operating Measures (1)
 
Q3’19 Low
 
 
Q3’19
High
 
 
FY’19 Low
 
 
FY’19 High
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subscription ACV
 $51 
 $55 
 $207 
 $217 
License and Subscription Bookings
 $110 
 $120 
 $485 
 $505 
Subscription % of Bookings
  92%
  92%
  86%
  86%
 
(1) An explanation of the metrics included in this table is provided below.
 
Financial Measures (1)
 
Q3’19 Low
 
 
Q3’19 High
 
 
FY’19 Low
 
 
FY’19 High
 
Total Subscription Revenue
 $138 
 $147 
 $596 
 $616 
Perpetual Support Revenue
 $100 
 $103 
 $419 
 $424 
Total Recurring Revenue
 $238 
 $250 
 $1,015 
 $1,040 
Perpetual License Revenue
 $9 
 $10 
 $70 
 $73 
Total Software Revenue
 $247 
 $260 
 $1,084 
 $1,112 
Professional Services Revenue
 $41 
 $43 
 $166 
 $168 
Total Revenue
 $288 
 $303 
 $1,250 
 $1,280 
 
    
    
    
    
Operating Expense (GAAP)
 $211 
 $212 
 $886 
 $890 
Operating Expense (Non-GAAP)
 $180 
 $182 
 $715 
 $718 
Operating Margin (GAAP)
  (1%)
  4%
  3%
  6%
Operating Margin (Non-GAAP)
  13%
  17%
  20%
  22%
Tax Rate (GAAP)
  (50%)
  (50%)
  (60%)
  (60%)
Tax Rate (Non-GAAP)
  18%
  18%
  19%
  18%
Shares Outstanding
  118 
  118 
  118 
  118 
EPS (GAAP)
 $(0.15)
 $0.03 
 $0.02 
 $0.44 
EPS (Non-GAAP) 
 $0.20 
 $0.30 
 $1.45 
 $1.70 
Free Cash Flow
    
    
 $265 
 $275 
Adjusted Free Cash Flow
    
    
 $290 
 $300 
 
(1) The third quarter and fiscal 2019 non-GAAP operating expense, non-GAAP operating margin 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). Adjusted free cash flow excludes $25 million of restructuring payments related to our workforce realignment and headquarters relocation. From a cash perspective, the free rent and estimated sublease income over the first 18 months on our Seaport headquarters total approximately $30 million, as compared to the estimated cash outflows of $34 million on the Needham headquarters, which will be incurred over the next 44 months.
 
In millions
  Q3’19 
 
FY’19
 
 
    
 
 
 
Effect of acquisition accounting on fair value of acquired deferred revenue
 $0 
 $1 
Acquisition related charges
  - 
 $1 
Restructuring and headquarters relocation charges (1)
  - 
 $45 
Intangible asset amortization expense
 $13 
 $51 
Stock-based compensation expense
 $28 
 $114 
Total Estimated Pre-Tax GAAP adjustments
 $41 
 $212 
 
(1) Includes $16 million related to our workforce realignment recorded in the first quarter of 2019 and $29 million rrecorded in the first and second quarters of 2019 related to lease commitments and accelerated depreciation expense associated with exiting the Needham headquarters facility  and relocating to our new worldwide headquarters in the Boston Seaport District, which occurred in January 2019.
 
 
3
 
 
Fiscal 2019 Business Outlook – ASC 605
For the third quarter and fiscal year ending September 30, 2019, the company expects: 
In millions except per share amounts
 
 
 
 
 
 
 
 
 
 
 
 
Operating Measures (1)
 
Q3’19 Low
 
 
Q3’19
High
 
 
FY’19 Low
 
 
FY’19 High
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subscription ACV
 $51 
 $55 
 $207 
 $217 
License and Subscription Bookings
 $110 
 $120 
 $485 
 $505 
Subscription % of Bookings
  92%
  92%
  86%
  86%
 
(1) An explanation of the metrics included in this table is provided below.
 
Financial Measures
 
Q3’19 Low
 
 
Q3’19 High
 
 
FY’19 Low
 
 
FY’19 High
 
Subscription Revenue
 $166 
 $170 
 $664 
 $670 
Support Revenue
 $105 
 $105 
 $424 
 $425 
Perpetual License Revenue
 $9 
 $10 
 $70 
 $73 
Total Software Revenue
 $280 
 $285 
 $1,158 
 $1,168 
Professional Services Revenue
 $40 
 $40 
 $155 
 $157 
Total Revenue
 $320 
 $325 
 $1,313 
 $1,325 
Operating Expense (GAAP)
 $221 
 $223 
 $912 
 $917 
Operating Expense (Non-GAAP)
 $190 
 $192 
 $740 
 $745 
Operating Margin (GAAP)
  5%
  7%
  6%
  7%
Operating Margin (Non-GAAP)
  18%
  19%
  23%
  23%
Tax Rate (GAAP)
  30%
  30%
  30%
  30%
Tax Rate (Non-GAAP)
  19%
  18%
  19%
  18%
Shares Outstanding
  118 
  118 
  118 
  118 
EPS (GAAP)
 $0.03 
 $0.07 
 $0.25 
 $0.32 
EPS (Non-GAAP) 
 $0.31 
 $0.36 
 $1.75 
 $1.85 
Free Cash Flow
    
    
 $265 
 $275 
Adjusted Free Cash Flow
    
    
 $290 
 $300 
 
The third quarter and fiscal 2019 non-GAAP operating expense, non-GAAP operating margin 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). Adjusted free cash flow excludes $25 million of restructuring payments related to our workforce realignment and headquarters relocation. From a cash perspective, the free rent and estimated sublease income over the first 18 months on our Seaport headquarters total approximately $30 million, as compared to the estimated cash outflows of $34 million on the Needham headquarters, which will be incurred over the next 44 months.
 
In millions
  Q3’19 
 
FY’19
 
 
    
 
 
 
Effect of acquisition accounting on fair value of acquired deferred revenue
 $0 
 $1 
Acquisition related charges
  - 
 $1 
Restructuring and headquarters relocation charges (1)
  - 
 $45 
Intangible asset amortization expense
 $13 
 $51 
Stock-based compensation expense
 $28 
 $114 
Total Estimated Pre-Tax GAAP adjustments
 $41 
 $212 
 
(1) Includes $16 million related to our workforce realignment recorded in the first quarter of 2019 and $29 million recorded in the first and second quarters of 2019 related to lease commitments and accelerated depreciation expense associated with exiting the Needham headquarters facility and relocating to our new worldwide headquarters in the Boston Seaport District, which occured in January 2019.

 
4
 

PTC’s Fiscal Second 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 management presentation to discuss results at 5:00 pm ET on Wednesday, April 24, 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 dialling 866-483-9088 and entering the passcode 8020. The archived webcast will also be available on PTC’s Investor Relations website.
 
Bookings Metrics
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 transactions.
 
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 and without regard to contractual termination options) 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.
 
Total Deferred Revenue
Total Deferred Revenue consists of Billed Deferred Revenue and Unbilled Deferred Revenue. Unbilled deferred revenue is the aggregate of booked orders for license, support and subscription (including multi-year subscription contracts with start dates after October 1, 2018 that are subject to a limited annual cancellation right) for which the associated revenue has not been recognized and the customer has not been invoiced. We do not record Unbilled Deferred Revenue on our Consolidated Balance Sheet; we record such amounts as deferred revenue when we invoice the customer. Billed Deferred Revenue primarily relates to software agreements invoiced to customers for which the revenue has not yet been recognized. Billed deferred revenue can fluctuate quarterly based upon the contractual billing dates in our recurring revenue contracts, the timing of our fiscal reporting periods and foreign exchange rates.
 
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 Navigate™, a ThingWorx-based IoT solution for PLM, are allocated 50% to Solutions and 50% to IoT.
 
Annualized Recurring Revenue (ARR)
To help investors understand and assess the success of our subscription transition, we provide an Annualized Recurring Revenue operating measure. Annualized Recurring Revenue (ARR) for a given quarter is calculated by dividing the portion of non-GAAP software revenue attributable to subscription and support for the quarter by the number of days in the quarter and multiplying by 365. (A related metric is Subscription ARR, which is calculated by dividing the portion of non-GAAP revenue attributable to subscriptions for the quarter by the number of days in the quarter and multiplying by 365.) ARR should be viewed independently of revenue and deferred revenue as it is an operating measure and is not intended to be combined with or to replace either of those items. ARR is not a forecast of future revenue, which can be impacted by contract expiration and renewal rates and does not include revenue reported as perpetual license or professional services revenue in our consolidated statement of income. Subscription and support revenue and ARR disclosed in a quarter can be impacted by multiple factors, including but not limited to (1) the timing of the start of a contract or a renewal, including the impact of on-time renewals, support win-backs, and support conversions, which may vary by quarter, (2) the ramping of committed monthly payments under a subscription agreement over time, (3) multiple other contractual factors with the customer including other elements sold with the subscription or support contract, and (4) the impact of currency fluctuations. These factors can cause disclosed ARR to vary.
 
 
5
 
 
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.
 
Important Information About Non-GAAP References
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 PTC’s 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 charges, 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.
 
A reconciliation of non-GAAP measures to GAAP results is provided within this press release.
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 40% 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.
 
 
6
 
 
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; customers may not purchase our solutions or convert existing support contracts to subscription when or at the rates we expect; our businesses, including our Internet of Things (IoT) business, and Augmented Reality businesses, may not expand and/or generate the revenue we expect; foreign currency exchange rates may vary from our expectations and thereby affect our reported revenue and expense; the mix of revenue between license & subscription solutions, support and professional services could be different than we expect, which could impact our EPS results; our transition to subscription-only licensing could adversely affect sales and revenue; sales of our solutions as subscriptions may not have the longer-term effect on revenue and earnings that we expect; 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; our strategic initiatives and investments may not generate the revenue we expect; we may be unable to expand our partner ecosystem as we expect and our partners may not generate the revenue we expect; we may be unable to generate sufficient operating cash flow to return 40% of free cash flow to shareholders and other uses of cash or our credit facility limits or other matters could preclude share repurchases. 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           @PTC           Blogs
 
PTC Investor Relations Contacts  
Tim Fox, 781-370-5961
Noelle Faris, 781-370-6899
tifox@ptc.com
nfaris@ptc.com
 
 
7
 
 
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 
 
 
  Three Months Ended
 
 
 
March 30,
 
 
March 30,
 
 
March 31,
 
 
 
2019
 
 
2019
 
 
2018
 
 
 
ASC 606
 
 
ASC 605
 
 
ASC 605
 
 
 
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
 
 
Subscription license
 $51,540 
 
 
 
 
 
 
Subscription support & cloud services
  83,228 
 
 
 
 
 
 
Total Subscription
  134,768 
 $162,070 
 $112,931 
Perpetual support
  104,417 
  103,564 
  126,683 
Total recurring revenue
  239,185 
  265,634 
  239,614 
Perpetual license
  10,336 
  11,267 
  22,839 
Total software revenue
  249,521 
  276,901 
  262,453 
Professional services
  40,930 
  38,598 
  45,430 
Total revenue (1)
  290,451 
  315,499 
  307,883 
 
    
    
    
Cost of revenue:
    
    
    
Cost of software revenue (2) (3)
  45,749 
  45,222 
  46,189 
Cost of professional services revenue (2) (3)
  34,155 
  32,745 
  37,519 
Total cost of revenue
  79,904 
  77,967 
  83,708 
 
    
    
    
Gross margin
  210,547 
  237,532 
  224,175 
 
    
    
    
Operating expenses:
    
    
    
Sales and marketing (2) (3)
  103,722 
  109,421 
  98,390 
Research and development (2) (3)
  61,402 
  61,402 
  62,197 
General and administrative (2) (3)
  35,371 
  35,371 
  33,369 
Amortization of acquired intangible assets
  5,930 
  5,930 
  7,895 
Restructuring and other charges, net
  26,980 
  26,980 
  114 
Total operating expenses
  233,405 
  239,104 
  201,965 
 
    
    
    
Operating income (loss)
  (22,858)
  (1,572)
  22,210 
Other expense, net (3)
  (10,562)
  (10,318)
  (10,664)
Income (loss) before income taxes
  (33,420)
  (11,890)
  11,546 
Provision for income taxes
  10,093 
  140 
  3,624 
Net income (loss)
 $(43,513)
 $(12,030)
 $7,922 
 
    
    
    
Earnings (loss) per share:
    
    
    
Basic
 $(0.37)
 $(0.10)
 $0.07 
Weighted average shares outstanding
  118,461 
  118,461 
  116,241 
 
    
    
    
Diluted
 $(0.37)
 $(0.10)
 $0.07 
Weighted average shares outstanding
  118,461 
  118,461 
  117,905 
 
(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 March 31, 2018.
 
 
8
 
 
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 
 
 
  Six Months Ended
 
 
 
March 30,
 
 
March 30,
 
 
March 31,
 
 
 
2019
 
 
2019
 
 
2018
 
 
 
ASC 606
 
 
ASC 605
 
 
ASC 605
 
Revenue:
 
 
 
 
 
 
 
 
 
Subscription license
 $115,057 
 
 
 
 
 
 
Subscription support & cloud services
  160,652 
 
 
 
 
 
 
Total Subscription
  275,709 
 $310,483 
 $212,939 
Perpetual support
  214,914 
  212,789 
  257,880 
Total recurring revenue
  490,623 
  523,272 
  470,819 
Perpetual license
  52,141 
  53,017 
  56,824 
Total software revenue
  542,764 
  576,289 
  527,643 
Professional services
  82,376 
  77,967 
  86,884 
Total revenue (1)
  625,140 
  654,256 
  614,527 
 
    
    
    
Cost of revenue:
    
    
    
Cost of software revenue (2) (3)
  89,509 
  88,199 
  92,805 
Cost of professional services revenue (2) (3)
  67,747 
  64,964 
  73,938 
Total cost of revenue
  157,256 
  153,163 
  166,743 
 
    
    
    
Gross margin
  467,884 
  501,093 
  447,784 
 
    
    
    
Operating expenses:
    
    
    
Sales and marketing (2) (3)
  207,940 
  216,725 
  197,765 
Research and development (2) (3)
  122,184 
  122,184 
  126,169 
General and administrative (2) (3)
  73,235 
  73,235 
  68,389 
Amortization of acquired intangible assets
  11,866 
  11,866 
  15,716 
Restructuring and other charges, net
  45,473 
  45,473 
  219 
Total operating expenses
  460,698 
  469,483 
  408,258 
 
    
    
    
Operating income
  7,186 
  31,610 
  39,526 
Other expense, net (3)
  (20,184)
  (20,046)
  (21,509)
Income (loss) before income taxes
  (12,998)
  11,564 
  18,017 
Provision (benefit) for income taxes (4)
  9,530 
  4,346 
  (3,782)
Net income (loss)
 $(22,528)
 $7,218 
 $21,799 
 
    
    
    
Earnings (loss) per share:
    
    
    
Basic
 $(0.19)
 $0.06 
 $0.19 
Weighted average shares outstanding
  118,392 
  118,392 
  115,986 
 
    
    
    
Diluted
 $(0.19)
 $0.06 
 $0.19 
Weighted average shares outstanding
  118,392 
  119,490 
  117,780 
 
(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 $0.3 million of non-service related net periodic pension income to other expense, net from cost of revenue and operating expenses for the six months ended March 31, 2018.
(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.
 
 
9
 
 
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
 
 
 
March 30,
 
 
March 30,
 
 
March 31,
 
 
 
2019
 
 
2019
 
 
2018
 
 
 
ASC 606
 
 
ASC 605
 
 
ASC 605
 
License revenue (1)
 $61,876 
 $156,131 
 $120,505 
Support and cloud services revenue
  187,645 
  120,770 
  141,948 
Professional services revenue
  40,930 
  38,598 
  45,430 
Total revenue
 $290,451 
 $315,499 
 $307,883 
 

 
  Six Months Ended
 

 
March 30,
 
 
March 30,
 
 
March 31,
 
 
 
    2019 
 
 
    2019 
 
 
    2018 
 

 ASC 606
 
 
         ASC 605 
 
 
ASC 605
 
License revenue (1)
 $167,198 
 $330,036 
 $240,023 
Support and cloud services revenue
  375,566 
  246,253 
  287,620 
Professional services revenue
  82,376 
  77,967 
  86,884 
Total revenue
 $625,140 
 $654,256 
 $614,527 
(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
 
 
 
March 30,
 
 
March 30,
 
 
March 31,
 
 
 
2019
 
 
2019
 
 
2018
 
 
 
ASC 606
 
 
ASC 605
 
 
ASC 605
 
Cost of software revenue
 $1,206 
 $1,206 
 $1,098 
Cost of professional services revenue
  1,906 
  1,906 
  1,669 
Sales and marketing
  9,522 
  9,522 
  5,038 
Research and development
  5,190 
  5,190 
  3,383 
General and administrative
  9,143 
  9,143 
  5,838 
Total stock-based compensation
 $26,967 
 $26,967 
 $17,026 
 
 
 
Six Months Ended
 
 
 
March 30,
 
 
March 30,
 
 
March 31,
 
 
 
2019
 
 
2019
 
 
2018
 
 
 
ASC 606
 
 
ASC 605
 
 
ASC 605
 
Cost of software revenue
 $2,503 
 $2,503 
 $2,319 
Cost of professional services revenue
  3,720 
  3,720 
  3,375 
Sales and marketing
  19,244 
  19,244 
  9,917 
Research and development
  10,090 
  10,090 
  6,343 
General and administrative
  20,817 
  20,817 
  13,403 
Total stock-based compensation
 $56,374 
 $56,374 
 $35,357 
 
 
10
 
 
PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
 
 
 
  Three Months Ended
 
 
 
March 30,
 
 
March 30,
 
 
March 31,
 
 
 
2019
 
 
2019
 
 
2018
 
 
 
ASC 606
 
 
ASC 605
 
 
ASC 605
 
 
 
 
 
 
 
 
 
 
 
GAAP revenue
 $290,451 
 $315,499 
 $307,883 
Fair value adjustment of acquired deferred subscription revenue
  - 
  - 
  75 
Fair value adjustment of acquired deferred services revenue
  198 
  198 
  233 
Non-GAAP revenue
 $290,649 
 $315,697 
 $308,191 
 
    
    
    
GAAP gross margin
 $210,547 
 $237,532 
 $224,175 
Fair value adjustment of acquired deferred revenue
  198 
  198 
  308 
Fair value adjustment to deferred services cost
  (77)
  (77)
  (96)
Stock-based compensation
  3,112 
  3,112 
  2,767 
Amortization of acquired intangible assets included in cost of revenue
  6,842 
  6,842 
  6,556 
Non-GAAP gross margin
 $220,622 
 $247,607 
 $233,710 
 
    
    
    
GAAP operating income (loss)
 $(22,858)
 $(1,572)
 $22,210 
Fair value adjustment of acquired deferred revenue
  198 
  198 
  308 
Fair value adjustment to deferred services cost
  (77)
  (77)
  (96)
Stock-based compensation
  26,967 
  26,967 
  17,026 
Amortization of acquired intangible assets included in cost of revenue
  6,842 
  6,842 
  6,556 
Amortization of acquired intangible assets
  5,930 
  5,930 
  7,895 
Acquisition-related and other transactional charges included in general and administrative costs
  372 
  372 
  133 
Restructuring and other charges, net
  26,980 
  26,980 
  114 
Non-GAAP operating income (1)
 $44,354 
 $65,640 
 $54,146 
 
    
    
    
GAAP net income (loss)
 $(43,513)
 $(12,030)
 $7,922 
Fair value adjustment of acquired deferred revenue
  198 
  198 
  308 
Fair value adjustment to deferred services cost
  (77)
  (77)
  (96)
Stock-based compensation
  26,967 
  26,967 
  17,026 
Amortization of acquired intangible assets included in cost of revenue
  6,842 
  6,842 
  6,556 
Amortization of acquired intangible assets
  5,930 
  5,930 
  7,895 
Acquisition-related and other transactional charges included in general and administrative costs
  372 
  372 
  133 
Restructuring and other charges, net
  26,980 
  26,980 
  114 
Income tax adjustments (2)
  2,138 
  (10,399)
  (80)
Non-GAAP net income
 $25,837 
 $44,783 
 $39,778 
 
    
    
    
GAAP diluted earnings (loss) per share
 $(0.37)
 $(0.10)
 $0.07 
Fair value adjustment of acquired deferred revenue
  - 
  - 
  - 
Stock-based compensation
  0.23 
  0.23 
  0.14 
Amortization of acquired intangibles
  0.11 
  0.11 
  0.12 
Acquisition-related and other transactional charges
  - 
  - 
  - 
Restructuring and other charges, net
  0.23 
  0.23 
  - 
Income tax adjustments
  0.02 
  (0.09)
  - 
Non-GAAP diluted earnings per share
 $0.22 
 $0.38 
 $0.34 
 
    
    
    
GAAP diluted weighted average shares outstanding
  118,461 
  118,461 
  117,905 
Dilutive effect of stock-based compensation plans
  881 
  881 
  - 
Non-GAAP diluted weighted average shares outstanding
  119,342 
  119,342 
  117,905 
 
(1) Operating margin impact of non-GAAP adjustments:
 
 
  Three Months Ended
 
 
 
March 30,
 
 
March 30,
 
 
March 31,
 
 
 
2019
 
 
2019
 
 
2018
 
 
 
ASC 606
 
 
ASC 605
 
 
ASC 605
 
GAAP operating margin
  -7.9%
  -0.5%
  7.2%
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
  9.3%
  8.5%
  5.5%
Amortization of acquired intangibles
  4.4%
  4.0%
  4.7%
Acquisition-related and other transactional charges
  0.1%
  0.1%
  0.0%
Restructuring and other charges, net
  9.3%
  8.6%
  0.0%
Non-GAAP operating margin
  15.3%
  20.8%
  17.6%
 
(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.
 
 
11
 
 
PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
 
 
 
  Six Months Ended
 
 
 
March 30,
 
 
March 30,
 
 
March 31,
 
 
 
2019
 
 
2019
 
 
2018
 
 
 
ASC 606
 
 
ASC 605
 
 
ASC 605
 
GAAP revenue
 $625,140 
 $654,256 
 $614,527 
Fair value adjustment of acquired deferred subscription revenue
  66 
  66 
  191 
Fair value adjustment of acquired deferred services revenue
  405 
  405 
  480 
Non-GAAP revenue
 $625,611 
 $654,727 
 $615,198 
 
    
    
    
GAAP gross margin
 $467,884 
 $501,093 
 $447,784 
Fair value adjustment of acquired deferred revenue
  471 
  471 
  671 
Fair value adjustment to deferred services cost
  (162)
  (162)
  (200)
Stock-based compensation
  6,223 
  6,223 
  5,694 
Amortization of acquired intangible assets included in cost of revenue
  13,559 
  13,559 
  13,231 
Non-GAAP gross margin
 $487,975 
 $521,184 
 $467,180 
 
    
    
    
GAAP operating income
 $7,186 
 $31,610 
 $39,526 
Fair value adjustment of acquired deferred revenue
  471 
  471 
  671 
Fair value adjustment to deferred services cost
  (162)
  (162)
  (200)
Stock-based compensation
  56,374 
  56,374 
  35,357 
Amortization of acquired intangible assets included in cost of revenue
  13,559 
  13,559 
  13,231 
Amortization of acquired intangible assets
  11,866 
  11,866 
  15,716 
Acquisition-related and other transactional charges included in general and administrative costs
  791 
  791 
  140 
Restructuring and other charges, net
  45,473 
  45,473 
  219 
Non-GAAP operating income (1)
 $135,558 
 $159,982 
 $104,660 
 
    
    
    
GAAP net income (loss)
 $(22,528)
 $7,218 
 $21,799 
Fair value adjustment of acquired deferred revenue
  471 
  471 
  671 
Fair value adjustment to deferred services cost
  (162)
  (162)
  (200)
Stock-based compensation
  56,374 
  56,374 
  35,357 
Amortization of acquired intangible assets included in cost of revenue
  13,559 
  13,559 
  13,231 
Amortization of acquired intangible assets
  11,866 
  11,866 
  15,716 
Acquisition-related and other transactional charges included in general and administrative costs
  791 
  791 
  140 
Restructuring and other charges, net
  45,473 
  45,473 
  219 
Income tax adjustments (2)
  (12,718)
  (22,540)
  (11,080)
Non-GAAP net income
 $93,126 
 $113,050 
 $75,853 
 
    
    
    
GAAP diluted earnings (loss) per share
 $(0.19)
 $0.06 
 $0.19 
Fair value adjustment of acquired deferred revenue
  - 
  - 
  0.01 
Stock-based compensation
  0.47 
  0.47 
  0.30 
Amortization of acquired intangibles
  0.21 
  0.21 
  0.25 
Acquisition-related and other transactional charges
  0.01 
  0.01 
  - 
Restructuring and other charges, net
  0.38 
  0.38 
  - 
Income tax adjustments
  (0.11)
  (0.19)
  (0.09)
Non-GAAP diluted earnings per share
 $0.78 
 $0.95 
 $0.64 
 
    
    
    
GAAP diluted weighted average shares outstanding
  118,392 
  119,490 
  117,780 
Dilutive effect of stock-based compensation plans
  1,098 
  - 
  - 
Non-GAAP diluted weighted average shares outstanding
  119,490 
  119,490 
  117,780 
 
(1) Operating margin impact of non-GAAP adjustments:
 
 
  Six Months Ended              
 
 
 
March 30,
 
 
March 30,
 
 
March 31,
 
 
 
2019
 
 
2019
 
 
2018
 
 
 
ASC 606
 
 
ASC 605
 
 
ASC 605
 
GAAP operating margin
  1.1%
  4.8%
  6.4%
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
  9.0%
  8.6%
  5.8%
Amortization of acquired intangibles
  4.1%
  3.9%
  4.7%
Acquisition-related and other transactional charges
  0.1%
  0.1%
  0.0%
Restructuring and other charges, net
  7.3%
  7.0%
  0.1%
Non-GAAP operating margin
  21.7%
  24.4%
  17.0%
 
(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.
 
 
12
 
 
PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
 
March 30,
 
 
March 30,
 
 
September 30,
 
 
 
2019
 
 
2019
 
 
2018
 
 
 
ASC 606 (1)
 
 
ASC 605
 
 
ASC 605
 
 
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $294,299 
 $294,299 
 $259,946 
Marketable securities
  56,415 
  56,415 
  55,951 
Accounts receivable, net
  352,217 
  110,510 
  129,297 
Property and equipment, net
  106,837 
  106,837 
  80,613 
Goodwill and acquired intangible assets, net
  1,421,913 
  1,421,913 
  1,382,659 
Other assets
  484,138 
  490,722 
  420,556 
Total assets
 $2,715,819 
 $2,480,696 
 $2,329,022 
 
    
    
    
LIABILITIES AND STOCKHOLDERS' EQUITY
    
    
    
 
    
    
    
Deferred revenue
 $391,807 
 $553,709 
 $499,442 
Debt, net of deferred issuance costs
  738,700 
  738,700 
  643,268 
Other liabilities
  337,604 
  275,359 
  311,723 
Stockholders' equity
  1,247,708 
  912,928 
  874,589 
Total liabilities and stockholders' equity
 $2,715,819 
 $2,480,696 
 $2,329,022 
 
(1) Our consolidated balance sheet as of March 30, 2019 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 second quarter of 2019.
 
 
13
 
 
PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 
 
 Three Months Ended
 
 
  Six Months Ended        
 
 
 
March 30,
 
 
March 31,
 
 
March 30,
 
 
March 31,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
 $(43,513)
 $7,922 
 $(22,528)
 $21,799 
Stock-based compensation
  26,967 
  17,026 
  56,374 
  35,357 
Depreciation and amortization
  19,505 
  21,681 
  39,558 
  42,727 
Accounts receivable
  30,476 
  10,424 
  54,501 
  32,027 
Accounts payable and accruals
  9,264 
  13,927 
  (27,868)
  (39,130)
Deferred revenue
  58,767 
  36,972 
  36,947 
  59,027 
Income taxes
  5,991 
  138 
  (15,677)
  (14,134)
Other (1)
  33,673 
  2,993 
  41,037 
  (1,075)
Net cash provided by operating activities (3)
  141,130 
  111,083 
  162,344 
  136,598 
 
    
    
    
    
Capital expenditures
  (20,936)
  (4,762)
  (51,268)
  (11,139)
Acquisition of businesses, net of cash acquired (2)
  103 
  (3,000)
  (69,453)
  (3,000)
Purchase of intangible asset
  - 
  (500)
  - 
  (3,000)
Borrowings (payments) on debt, net
  (40,000)
  (100,000)
  95,000 
  (70,000)
Net proceeds associated with issuance of common stock
  8,798 
  7,472 
  4,158 
  7,472 
Repurchases of common stock
  (64,994)
  - 
  (64,994)
  - 
Payments of withholding taxes in connection with
    
    
  - 
    
 vesting of stock-based awards
  (703)
  (454)
  (34,491)
  (33,942)
Proceeds from (purchase of) investment
  (7,500)
  - 
  (7,500)
  - 
Contingent consideration
  - 
  - 
  (1,575)
  (3,176)
Purchases of marketable securities, net
  (504)
  (5,046)
  (233)
  (5,554)
Other financing & investing activities
  1,709 
  - 
  114 
  - 
Foreign exchange impact on cash
  196 
  3,239 
  2,237 
  5,837 
 
    
    
    
    
Net change in cash, cash equivalents, and restricted cash (1)
  17,299 
  8,032 
  34,339 
  20,096 
Cash, cash equivalents, and restricted cash, beginning of period
  278,133 
  293,273 
  261,093 
  281,209 
Cash, cash equivalents, and restricted cash, end of period
 $295,432 
 $301,305 
 $295,432 
 $301,305 
 
(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 $0.1 million decrease and $0.3 million increase related to the change in restricted cash from the change in other current assets for the three months and six months ended March 31, 2018, respectively.
(2) On December 29, 2018, we acquired Frustum for $70 million, net of cash acquired.
(3) Our consolidated cash flows as of March 30, 2019 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 second quarter of 2019.
   
14
Blueprint
  Exhibit 99.2
 
 
PTC PREPARED REMARKS
SECOND QUARTER FISCAL 2019
April 24, 2019
 
Please refer to the “Important Disclosures” section of these prepared remarks for important information about our operating metrics (including Subscription ACV, License and Subscription Bookings, and Subscription % of Bookings), GAAP and non-GAAP definitions, and other important disclosures. Additional financial information is provided in the PTC Financial Data Tables posted with these prepared remarks to PTC’s Investor Relations website at investor.ptc.com.
 
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.
 
We adopted ASC 606 on October 1, 2018, which impacts our reported financial results, including the timing and classification of revenue. For comparability purposes, and unless otherwise specified, the amounts included in the commentary below refer to results under ASC 605 as shown in our financial statements, including the notes thereto.
 
Q2’19 ASC 605 Results vs. January 23, 2019 Guidance
 
Operating Measures
 
Guidance
 
 
Results
 
In millions
 
Q2’19Low
 
 
Q2’19High
 
 
Actual(1)
 
License and Subscription Bookings
 $107 
 $120 
 $112 
Subscription ACV
 $50 
 $55 
 $51 
Subscription % of Bookings
  93%
  93%
  91%
 
Financial Measures
 
GAAP Guidance
 
 
GAAP
 
 
Non-GAAP Guidance
 
 
Non-GAAP
 
In millions, except per share amounts
 
Q2’19 Low
 
 
Q2’19 High
 
 
 Results
 
 
Q2’19 Low
 
 
Q2’19 High
 
 
 Results
 
Subscription Revenue
 $156 
 $160 
 $162 
 $156 
 $160 
 $162 
Perpetual Support Revenue
 $106 
 $106 
 $104 
 $106 
 $106 
 $104 
Total Recurring Revenue
 $262