BOSTON, Nov. 3, 2021 /PRNewswire/ -- PTC (NASDAQ: PTC) today reported financial results for its fiscal fourth quarter and full year ended September 30, 2021.
"Our performance in 2021 reflects strong execution against the financial guidance we set at the beginning of our fiscal year. Capped by an outstanding fourth quarter, in fiscal 2021 we delivered our fourth consecutive year of double-digit organic ARR growth, while also delivering operating cash flow growth of 58% and free cash flow growth in excess of 60%," said James Heppelmann, President and CEO, PTC.
"In Q4 and throughout the year we saw growth across all product segments and geographies. Our Core CAD and PLM products continued to outpace market growth, and the strong performance of our Onshape and Arena businesses reflects the growing momentum for cloud-native SaaS technologies in the industrial software market," continued Heppelmann.
"Building on a track record of solid financial performance and market leading technology, we are accelerating our SaaS transition timeline by implementing key initiatives that better align us to SaaS best practices, including reorganizing our customer success organization and combining product development, delivery, and support under one umbrella. We are also incrementally investing in our Atlas platform, the SaaS transition of our Core CAD and PLM products, and product and go-to-market initiatives for our cloud-native Onshape and Arena businesses. These changes enable PTC to accelerate the transition to SaaS across our portfolio, begin moving our on-premise customers to SaaS offerings sooner than previously contemplated, and expand contribution margins. These moves enhance PTC's ability to support customers and deliver strong top-line growth coupled with strong free cash flow, expanding our opportunity to deliver shareholder value over the long-term," concluded Heppelmann.
Fourth quarter and full year 2021 highlights 1
Key operating and financial highlights are set forth below. For additional details, please refer to the Q4'21 earnings presentation and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com.
Fiscal 2022 Guidance
"PTC again delivered fourth quarter and full-year 2021 financial results in line with or exceeding the guidance we established at the beginning of the year," said Kristian Talvitie, EVP and CFO, PTC. "The accelerated reorganization and investments we are undertaking this year are designed to better align PTC to our SaaS future and are expected to de-risk our path towards delivering on our mid-term cash flow targets. Accordingly, we will record a $45 to $50 million restructuring charge in Q1. On a go-forward basis, our operating model will be more scalable, resulting in a sustained higher cash contribution margin. We expect to deliver ARR growth of 10% to 13%, approximately $430 million of cash from operations and approximately $400 million of Free Cash Flow, including approximately $50 million of restructuring payments in FY22."
In millions except per share amounts
FY'21
FY'22
Guidance
YoY
ARR (1)
$1,468
$1,615 - $1,660
10% - 13%
Cash from Operations (2)
$369
~$430
~17%
Free Cash Flow (2)
$344
~$400
~16%
Revenue
$1,807
$1,850 - $1,975
2% - 9%
(1)
FY21 ARR recast at FY22 Plan Fx, and excludes certain Vuforia amounts.
(2)
FY'21 cash from operations and free cash flow include $14.5 million of restructuring payments, $15.0 million of acquisition-related payments, and $17.9 million in un-forecasted payments related to the prior period tax exposure from a non-U.S. tax dispute. The FY'22 cash from operations and free cash flow guidance include expected restructuring payments of approximately $50 million - $55 million.
Our FY'22 financial guidance includes the assumptions below:
PTC's Fiscal Fourth Quarter and Full Year 2021 Results Conference CallThe Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, November 3, 2021.
To participate in the live conference call, dial (888) 330-2384 or (240) 789-2701and provide the passcode 4098724, or log in to the webcast, available on PTC's Investor Relations website. A replay will also be available.
Important Disclosures
Important Information About Our Non-GAAP Financial Measures PTC provides supplemental non-GAAP financial measures to its financial results. We use these non-GAAP financial measures, and we believe that they assist our investors, to make period-to-period comparisons of our operating performance because they provide a view of our operating results without items that are not, in our view, indicative of our operating results. These non-GAAP financial measures should not be construed as an alternative to GAAP results as the items excluded from the non-GAAP financial measures often have a material impact on our operating results, certain of those items are recurring, and others often recur. Management uses, and investors should consider, our non-GAAP financial measures only in conjunction with our GAAP results.
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: stock-based compensation; amortization of acquired intangible assets; acquisition-related and other transactional charges included in general and administrative expenses; restructuring and other charges, net; certain non-operating 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" on page 25 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020. In FY'21, we incurred tax expense related to a South Korean tax matter which is excluded from our non-GAAP financial measures as it is related to prior periods and not included in management's view of results for comparative purposes. We also recorded a tax benefit in FY'21 related to the release of our U.S. valuation allowance as a result of the Arena acquisition and our conclusion that it is now more likely than not that we will realize the majority of our deferred tax assets in the U.S. As the non-GAAP tax provision is calculated assuming that there is no valuation allowance, this benefit has been excluded from our non-GAAP financial measures.
Free Cash Flow - PTC provides information on 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 goals and intent to return approximately 50% of our free cash flow to shareholders via stock repurchases. Free cash flow is net cash provided by (used in) operations net of capital expenditures. Free cash flow is not a measure of cash available for discretionary expenditures.
Constant Currency (CC) Change Metric - We present CC information to provide a framework for assessing how our underlying business performed excluding the effects of foreign currency rate fluctuations. To present CC information, FY21 and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the foreign exchange rate as of September 30, 2020, rather than the actual exchange rates in effect during that period. All discussion of FY22 and comparative prior period ARR results (including FY21 baseline amounts) are reflected using the foreign exchange rates as of September 30, 2021.
Operating Measures ARR - To help investors understand and assess the performance of our business as a SaaS and on-premise subscription company we provide an ARR (Annual Run Rate) operating measure. ARR represents the annualized value of our portfolio of active subscription software, cloud, SaaS, and support contracts as of the end of the reporting period. ARR includes orders placed under our Strategic Alliance Agreement with Rockwell Automation, including orders placed to satisfy contractual minimum commitments.
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 customers.
Forward-Looking Statements Statements in this press release that are not historic facts, including statements about our future financial and growth expectations and targets, and potential stock repurchases, 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 not improve when or as we expect, or may deteriorate, due to, among other factors, the COVID-19 pandemic, which could cause customers to delay or reduce purchases of new software, reduce the number of subscriptions they carry, or delay payments to us, all of which would adversely affect ARR and our financial results, including cash flow; our businesses, including our SaaS businesses, may not expand and/or generate the revenue or ARR we expect if customers are slower to adopt our technologies than we expect or if they adopt competing technologies; our strategic initiatives and investments, including our restructuring and our accelerated investments in our transition to SaaS, may not deliver the results when or as we expect; we may be unable to generate sufficient operating cash flow to repay amounts under our credit facility 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 repayment and/or repurchases; foreign exchange rates may differ materially from those we expect; and orders associated with minimum commitments under our Strategic Alliance Agreement with Rockwell Automation may not result in subscription contracts sold through to end-user customers, which could cause the ARR associated with those orders to churn. 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
1 We include operating and non-GAAP financial measures in our operational highlights. The detailed definitions of these items and reconciliations of Non-GAAP financial measures to comparable GAAP measures are included below and in the reconciliation tables at the end of this press release.
PTC Investor Relations Contact Matt ShimaoSVP, Investor Relationsmshimao@ptc.cominvestor@ptc.com
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended
Twelve Months Ended
September 30,
2021
2020
Revenue:
Recurring revenue
$
429,350
350,097
1,616,328
1,281,949
Perpetual license
10,369
8,680
33,013
32,668
Professional services
40,937
32,204
157,818
143,798
Total revenue (1)
480,656
390,981
1,807,159
1,458,415
Cost of revenue (2)
99,748
84,615
371,102
334,271
Gross margin
380,908
306,366
1,436,057
1,124,144
Operating expenses:
Sales and marketing (2)
129,464
115,815
517,779
435,451
Research and development (2)
78,403
69,884
299,917
256,575
General and administrative (2)
48,589
45,931
206,006
159,826
Amortization of acquired intangible assets
7,688
7,346
29,396
28,713
Restructuring and other charges, net
1,627
378
2,211
32,716
Total operating expenses
265,771
239,354
1,055,309
913,281
Operating income
115,137
67,012
380,748
210,863
Other income (expense), net
54,385
(11,631)
11,007
(76,157)
Income before income taxes
169,522
55,381
391,755
134,706
Provision (benefit) for income taxes
(123,421)
1,975
(85,168)
4,011
Net income
292,943
53,406
476,923
130,695
Earnings per share:
Basic
2.50
0.46
4.08
1.13
Weighted average shares outstanding
117,230
116,069
116,836
115,663
Diluted
2.46
4.03
1.12
118,921
117,097
118,367
116,267
See supplemental financial data for revenue by license, support, and professional services.
See supplemental financial data for additional information about stock-based compensation.
SUPPLEMENTAL FINANCIAL DATA FOR REVENUE AND STOCK-BASED COMPENSATION
Revenue by license, support and services is as follows:
License revenue (1)
199,284
140,507
738,053
509,792
Support and cloud services revenue
240,435
218,270
911,288
804,825
Professional services revenue
Total revenue
(1) License revenue includes the portion of subscription revenue allocated to license.
The amounts in the income statement include stock-based compensation as follows:
Cost of revenue
5,229
4,761
19,263
13,969
Sales and marketing
11,179
13,346
53,712
37,351
Research and development
9,394
9,725
34,272
27,005
General and administrative
17,591
13,712
70,042
36,824
Total stock-based compensation
43,393
41,544
177,289
115,149
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
GAAP gross margin
Stock-based compensation
Amortization of acquired intangible assets included in cost of revenue
8,125
6,856
29,769
27,391
Non-GAAP gross margin
394,262
317,983
1,485,089
1,165,504
GAAP operating income
Acquisition-related and other transactional charges included in general and administrative costs
166
552
15,010
8,616
Non-GAAP operating income (1)
176,136
123,688
634,423
423,448
GAAP net income
Non-operating charges (credits) (2)
(68,829)
-
18,451
Income tax adjustments (3)
(154,546)
(18,295)
(191,611)
(63,283)
Non-GAAP net income
130,567
91,787
470,158
298,448
GAAP diluted earnings per share
0.36
0.35
1.50
0.99
Amortization of acquired intangibles
0.13
0.12
0.50
0.48
Acquisition-related and other transactional charges
0.07
0.01
0.02
0.28
Non-operating charges (credits)
(0.58)
0.16
Income tax adjustments
(1.30)
(0.16)
(1.62)
(0.54)
Non-GAAP diluted earnings per share
1.10
0.78
3.97
2.57
(1) Operating margin impact of non-GAAP adjustments:
GAAP operating margin
24.0
%
17.1
21.1
14.5
9.0
10.6
9.8
7.9
3.3
3.6
3.8
0.0
0.1
0.8
0.6
0.3
2.2
Non-GAAP operating margin
36.6
31.6
35.1
29.0
In the fourth quarter of 2021, we recorded a $69 million gain on our investment in Matterport, Inc. In fiscal 2020, we recognized $15 million of expense related to penalties for the early redemption of the 6.000% Senior Notes due in 2024 and wrote off approximately $3 million of related debt issuance costs.
(3)
In the three months ended September 30, 2021 our GAAP results included a benefit of $137.4 million related to the release of the valuation allowance on the majority of our U.S. net deferred tax assets. In the twelve months ended September 30, 2021 and September 30, 2020 our GAAP results included benefits of $179.7 million and $21.2 million, respectively. These results include the benefits of $42.3 million and $21.2 million, respectively, related to the release of a valuation allowance as a result of the Arena and Onshape acquisitions. As the non-GAAP tax provision is calculated assuming that there is no valuation allowance, these benefits have been excluded. 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. Additionally, our non-GAAP results for the twelve months of FY'21 exclude tax expense of $34.8 million related to a non-U.S. prior period tax exposure, primarily related to foreign withholding taxes.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
Cash and cash equivalents
326,532
275,458
Marketable securities
59,099
Accounts receivable, net
541,072
415,221
Property and equipment, net
100,237
101,499
Goodwill and acquired intangible assets, net
2,570,854
1,863,356
Lease assets, net
152,337
149,933
Other assets
826,037
518,172
Total assets
4,517,069
3,382,738
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred revenue
497,677
426,465
Debt, net of deferred issuance costs
1,439,471
1,005,314
Lease obligations
208,799
215,023
Other liabilities
332,654
297,688
Stockholders' equity
2,038,468
1,438,248
Total liabilities and stockholders' equity
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Depreciation and amortization
22,569
20,140
85,239
80,817
Amortization of right-of-use lease assets
9,264
9,220
37,295
38,687
Gain on investment
Accounts receivable
(115,308)
(87,027)
(119,418)
(32,365)
Accounts payable and accruals
25,916
14
41,871
5,147
27,969
13,689
58,702
17,046
Income taxes
(130,602)
(6,812)
(144,126)
(51,257)
Other
(61,994)
(10,200)
(176,137)
(70,111)
Net cash provided by operating activities
45,321
33,974
368,809
233,808
Capital expenditures
(13,051)
(4,784)
(24,713)
(20,196)
Acquisition of businesses, net of cash acquired (1)
(251)
(14,958)
(718,030)
(483,478)
Purchase of intangible assets
(550)
(11,050)
Purchase of investment
(2,000)
(4,000)
Borrowings (payments) on debt, net
(40,000)
(120,000)
432,000
344,875
Repurchases of common stock
(30,000)
Net proceeds associated with issuance of common stock
11,091
9,402
21,575
18,382
Payments of withholding taxes in connection with vesting of stock-based awards
(10,742)
(508)
(52,957)
(33,740)
Debt issuance costs
(24)
(17,107)
Debt early redemption premium
(15,000)
Net proceeds from (purchases of) marketable securities (2)
(1,532)
58,469
(1,827)
Other financing & investing activities
2,181
(7,692)
611
(9,421)
Foreign exchange impact on cash
(1,773)
4,152
(127)
25
Net change in cash, cash equivalents, and restricted cash
(39,224)
(101,970)
51,087
5,271
Cash, cash equivalents, and restricted cash, beginning of period
366,271
377,930
275,960
270,689
Cash, cash equivalents, and restricted cash, end of period
327,047
Cash provided by operating activities (3)
Free cash flow (3)
32,270
29,190
344,096
213,612
In the second quarter of 2021, we acquired Arena for approximately $715 million, net of cash acquired. In the first quarter of 2020, we acquired Onshape for $469 million, net of cash acquired.
In the first quarter of 2021, we sold all of our available-for-sale securities.
Operating and free cash flow includes $0.8 million and $14.5 million of restructuring payments in the three and twelve months ended September 30, 2021, respectively, compared with $7.2 million and $42.0 million in the three and twelve months ended September 30, 2020. Operating and free cash flow includes $0.1 million and $15.0 million of acquisition-related payments for the three and twelve months ended September 30, 2021, respectively, compared with $0.8 million and $9.6 million in the three and twelve months ended September 30, 2020. Operating and free cash flow includes $17.9 million in un-forecasted payments related to the prior period tax exposure from a non-U.S. tax dispute in the twelve months ended September 30, 2021.
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SOURCE PTC Inc.