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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 27, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from_ to_

Commission File Number: 0-18059

 

PTC Inc.

(Exact name of registrant as specified in its charter)

 

 

Massachusetts

 

04-2866152

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

121 Seaport Boulevard, Boston, MA 02210

(Address of principal executive offices, including zip code)

(781) 370-5000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock, $.01 par value per share

PTC

NASDAQ Global Select Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

There were 116,117,972 shares of our common stock outstanding on August 3, 2020

 

 


PTC Inc.

INDEX TO FORM 10-Q

For the Quarter Ended June 27, 2020

 

 

 

 

 

Page

Number

Part I—FINANCIAL INFORMATION

 

 

Item 1.

 

Unaudited Condensed Consolidated Financial Statements:

 

 

 

 

Consolidated Balance Sheets as of June 27, 2020 and September 30, 2019

 

1

 

 

Consolidated Statements of Operations for the three and nine months ended June 27, 2020 and June 29, 2019

 

2

 

 

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended June 27, 2020 and June 29, 2019

 

3

 

 

Consolidated Statements of Cash Flows for the nine months ended June 27, 2020 and June 29, 2019

 

4

 

 

Consolidated Statements of Stockholders' Equity for the three and nine months ended June 27, 2020 and June 29, 2019

 

5

 

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

30

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

42

Item 4.

 

Controls and Procedures

 

42

 

 

 

 

 

 

 

 

 

 

Part II—OTHER INFORMATION

 

 

Item 1A.

 

Risk Factors

 

43

Item 6.

 

Exhibits

 

43

Signature

 

44

 

 

 

 


PART I—FINANCIAL INFORMATION

ITEM 1.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PTC Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

 

 

 

June 27,

2020

 

 

September 30,

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

377,428

 

 

$

269,579

 

Short-term marketable securities

 

 

25,830

 

 

 

27,891

 

Accounts receivable, net of allowance for doubtful accounts of $632 and $744 at June 27, 2020 and September 30, 2019, respectively

 

 

319,244

 

 

 

372,743

 

Prepaid expenses

 

 

72,630

 

 

 

52,701

 

Other current assets

 

 

52,106

 

 

 

59,707

 

Total current assets

 

 

847,238

 

 

 

782,621

 

Property and equipment, net

 

 

101,617

 

 

 

105,531

 

Goodwill

 

 

1,605,204

 

 

 

1,238,179

 

Acquired intangible assets, net

 

 

247,173

 

 

 

169,949

 

Long-term marketable securities

 

 

31,958

 

 

 

29,544

 

Deferred tax assets

 

 

196,701

 

 

 

198,634

 

Operating right-of-use lease assets

 

 

151,044

 

 

 

 

Other assets

 

 

195,234

 

 

 

140,130

 

Total assets

 

$

3,376,169

 

 

$

2,664,588

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

29,954

 

 

$

42,442

 

Accrued expenses and other current liabilities

 

 

97,305

 

 

 

104,028

 

Accrued compensation and benefits

 

 

89,728

 

 

 

88,769

 

Accrued income taxes

 

 

16,707

 

 

 

17,407

 

Deferred revenue

 

 

395,849

 

 

 

385,509

 

Short-term lease obligations

 

 

36,748

 

 

 

 

Total current liabilities

 

 

666,291

 

 

 

638,155

 

Long-term debt

 

 

1,124,702

 

 

 

669,134

 

Deferred tax liabilities

 

 

17,097

 

 

 

41,683

 

Deferred revenue

 

 

8,833

 

 

 

11,123

 

Long-term lease obligations

 

 

179,331

 

 

 

 

Other liabilities

 

 

52,348

 

 

 

102,495

 

Total liabilities

 

 

2,048,602

 

 

 

1,462,590

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 5,000 shares authorized; none issued

 

 

 

 

 

 

Common stock, $0.01 par value; 500,000 shares authorized; 115,976 and 114,899 shares issued and outstanding at June 27, 2020 and September 30, 2019, respectively

 

 

1,160

 

 

 

1,149

 

Additional paid-in capital

 

 

1,552,291

 

 

 

1,502,949

 

Accumulated deficit

 

 

(115,673

)

 

 

(191,390

)

Accumulated other comprehensive loss

 

 

(110,211

)

 

 

(110,710

)

Total stockholders’ equity

 

 

1,327,567

 

 

 

1,201,998

 

Total liabilities and stockholders’ equity

 

$

3,376,169

 

 

$

2,664,588

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

1


PTC Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

June 27,

2020

 

 

June 29,

2019

 

 

June 27,

2020

 

 

June 29,

2019

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License

 

$

118,248

 

 

$

62,918

 

 

$

369,285

 

 

$

230,116

 

Support and cloud services

 

 

199,146

 

 

 

190,487

 

 

 

586,555

 

 

 

566,053

 

Total software revenue

 

 

317,394

 

 

 

253,405

 

 

 

955,840

 

 

 

796,169

 

Professional services

 

 

34,327

 

 

 

42,081

 

 

 

111,594

 

 

 

124,457

 

Total revenue

 

 

351,721

 

 

 

295,486

 

 

 

1,067,434

 

 

 

920,626

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of license revenue

 

 

13,001

 

 

 

13,307

 

 

 

40,047

 

 

 

38,745

 

Cost of support and cloud services revenue

 

 

34,788

 

 

 

33,785

 

 

 

107,980

 

 

 

97,856

 

Total cost of software revenue

 

 

47,789

 

 

 

47,092

 

 

 

148,027

 

 

 

136,601

 

Cost of professional services revenue

 

 

31,435

 

 

 

35,613

 

 

 

101,629

 

 

 

103,360

 

Total cost of revenue

 

 

79,224

 

 

 

82,705

 

 

 

249,656

 

 

 

239,961

 

Gross margin

 

 

272,497

 

 

 

212,781

 

 

 

817,778

 

 

 

680,665

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

104,594

 

 

 

108,202

 

 

 

319,636

 

 

 

316,142

 

Research and development

 

 

61,429

 

 

 

60,590

 

 

 

186,691

 

 

 

182,774

 

General and administrative

 

 

35,709

 

 

 

28,773

 

 

 

113,895

 

 

 

102,008

 

Amortization of acquired intangible assets

 

 

7,302

 

 

 

5,920

 

 

 

21,367

 

 

 

17,786

 

Restructuring and other charges, net

 

 

62

 

 

 

(9

)

 

 

32,338

 

 

 

45,464

 

Total operating expenses

 

 

209,096

 

 

 

203,476

 

 

 

673,927

 

 

 

664,174

 

Operating income

 

 

63,401

 

 

 

9,305

 

 

 

143,851

 

 

 

16,491

 

Interest and debt premium expense

 

 

(19,660

)

 

 

(10,816

)

 

 

(64,376

)

 

 

(32,475

)

Other income (expense), net

 

 

775

 

 

 

1,026

 

 

 

(150

)

 

 

2,501

 

Income (loss) before income taxes

 

 

44,516

 

 

 

(485

)

 

 

79,325

 

 

 

(13,483

)

Provision for income taxes

 

 

9,838

 

 

 

14,273

 

 

 

2,036

 

 

 

23,803

 

Net income (loss)

 

$

34,678

 

 

$

(14,758

)

 

$

77,289

 

 

$

(37,286

)

Earnings (loss) per share—Basic

 

$

0.30

 

 

$

(0.13

)

 

$

0.67

 

 

$

(0.32

)

Earnings (loss) per share—Diluted

 

$

0.30

 

 

$

(0.13

)

 

$

0.67

 

 

$

(0.32

)

Weighted-average shares outstanding—Basic

 

 

115,759

 

 

 

116,133

 

 

 

115,521

 

 

 

117,636

 

Weighted-average shares outstanding—Diluted

 

 

116,229

 

 

 

116,133

 

 

 

115,981

 

 

 

117,636

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

2


PTC Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

June 27,

2020

 

 

June 29,

2019

 

 

June 27,

2020

 

 

June 29,

2019

 

Net income (loss)

 

$

34,678

 

 

$

(14,758

)

 

$

77,289

 

 

$

(37,286

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedge loss arising during the period, net of tax benefit of $0.4 million and $0.2 million in the third quarter of 2020 and 2019, respectively, and $1.2 million and $0 million in the first nine months of 2020 and 2019, respectively

 

 

(1,148

)

 

 

(2,644

)

 

 

(3,790

)

 

 

(1,818

)

Net hedge gain reclassified into earnings, net of tax provision of $0 million in the third quarter of 2020 and 2019, respectively, and $0 million and $0.1 million in the first nine months of 2020 and 2019, respectively

 

 

 

 

 

 

 

 

 

 

 

(549

)

Realized and unrealized loss on hedging instruments

 

 

(1,148

)

 

 

(2,644

)

 

 

(3,790

)

 

 

(2,367

)

Foreign currency translation adjustment, net of tax of $0 for

each period

 

 

3,089

 

 

 

4,393

 

 

 

2,677

 

 

 

(7,209

)

Unrealized gain on marketable securities, net of tax of $0

for each period

 

 

822

 

 

 

175

 

 

 

278

 

 

 

477

 

Amortization of net actuarial pension gain included in net income, net of tax provision of $0.3 million and $0.2 million in the third quarter of 2020 and 2019, respectively, and $0.8 million and $0.5 million in the first nine months of 2020 and 2019, respectively

 

 

673

 

 

 

418

 

 

 

2,027

 

 

 

1,277

 

Change in unamortized pension gain (loss) during the period

related to changes in foreign currency

 

 

(152

)

 

 

(230

)

 

 

(693

)

 

 

395

 

Other comprehensive income (loss)

 

 

3,284

 

 

 

2,112

 

 

 

499

 

 

 

(7,427

)

Comprehensive income (loss)

 

$

37,962

 

 

$

(12,646

)

 

$

77,788

 

 

$

(44,713

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

3


PTC Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Nine months ended

 

 

 

June 27,

2020

 

 

June 29,

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income (loss)

 

$

77,289

 

 

$

(37,286

)

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

60,677

 

 

 

58,634

 

Amortization of right-of-use lease assets

 

 

29,467

 

 

 

 

Stock-based compensation

 

 

73,605

 

 

 

71,608

 

Other non-cash items, net

 

 

(2,786

)

 

 

(2,721

)

Changes in operating assets and liabilities, excluding the effects of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

54,662

 

 

 

88,254

 

Accounts payable and accrued expenses

 

 

4,255

 

 

 

4,124

 

Accrued compensation and benefits

 

 

878

 

 

 

(23,442

)

Deferred revenue

 

 

3,357

 

 

 

25,325

 

Accrued income taxes

 

 

(44,445

)

 

 

(12,777

)

Other current assets and prepaid expenses

 

 

15,311

 

 

 

(6,336

)

Operating lease liabilities

 

 

(8,871

)

 

 

 

Other noncurrent assets and liabilities

 

 

(63,565

)

 

 

64,546

 

Net cash provided by operating activities

 

 

199,834

 

 

 

229,929

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(15,412

)

 

 

(59,579

)

Purchases of short- and long-term marketable securities

 

 

(26,087

)

 

 

(18,950

)

Proceeds from sales of short- and long-term marketable securities

 

 

1,521

 

 

 

 

Proceeds from maturities of short- and long-term marketable securities

 

 

24,271

 

 

 

20,677

 

Acquisitions of businesses, net of cash acquired

 

 

(468,520

)

 

 

(86,737

)

Purchases of investments

 

 

 

 

 

(7,500

)

Purchase of intangible assets

 

 

(11,050

)

 

 

 

Settlement of net investment hedges

 

 

(1,729

)

 

 

4,509

 

Net cash used in investing activities

 

 

(497,006

)

 

 

(147,580

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of Senior Notes

 

 

1,000,000

 

 

 

 

Borrowings under credit facility

 

 

455,000

 

 

 

205,000

 

Repayments of Senior Notes

 

 

(500,000

)

 

 

 

Repayments of borrowings under credit facility

 

 

(490,125

)

 

 

(150,000

)

Repurchases of common stock

 

 

 

 

 

(89,995

)

Proceeds from issuance of common stock

 

 

8,980

 

 

 

4,158

 

Debt issuance costs

 

 

(17,083

)

 

 

 

Contingent consideration

 

 

 

 

 

(1,575

)

Debt early redemption premium

 

 

(15,000

)

 

 

 

Payments of withholding taxes in connection with stock-based awards

 

 

(33,232

)

 

 

(44,191

)

Net cash provided by (used in) financing activities

 

 

408,540

 

 

 

(76,603

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(4,127

)

 

 

2,143

 

Net change in cash, cash equivalents, and restricted cash

 

 

107,241

 

 

 

7,889

 

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

 

 

270,689

 

 

 

261,093

 

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

 

$

377,930

 

 

$

268,982

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

4


 

PTC Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 27, 2020

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

Balance as of March 28, 2020

 

 

115,695

 

 

$

1,157

 

 

$

1,536,770

 

 

$

(150,351

)

 

$

(113,495

)

 

$

1,274,081

 

Common stock issued for employee stock-based awards

 

 

412

 

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

Shares surrendered by employees to pay taxes related to stock-based awards

 

 

(131