BOSTON, April 28, 2021 /PRNewswire/ -- PTC (NASDAQ: PTC) today reported financial results for its fiscal second quarter ended March 31, 2021.
"Our performance in the second quarter and the first half of 2021 reflects continued strong execution across all our businesses. We delivered double-digit top line growth with expanding margins, leading to strong operating and free cash flows," said James Heppelmann, President and CEO, PTC.
"I am especially excited about our pure-SaaS CAD and PLM solutions. In its first quarter as part of PTC, Arena Solutions delivered record bookings, while Onshape bookings are tracking to more than 100% growth for the year. These impressive results clearly demonstrate the increasing investment that customers are making in SaaS solutions," said Heppelmann. "With the strong leadership position we have captured in SaaS, PTC is poised to capitalize on this transition in the market."
"Perhaps more importantly, customers continue looking to PTC as a strategic partner in their digital transformation initiatives aimed to reduce costs and time to market, increase productivity, and transform their customer experience and engagement," continued Heppelmann. "Our Core CAD and PLM business continues to outpace the market, and FSG bookings were strong. With our continued investment in differentiated technologies, we look forward to building on our strong performance in the first half of fiscal 2021."
Second quarter 2021 highlights1Key operating and financial highlights are set forth below. For additional details, please refer to the Q2'21 earnings presentation and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com.
______________________________
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.
Fiscal 2021 Guidance
"PTC delivered strong ARR, Revenue, EPS, Operating Cash Flow and Free Cash Flow in the second quarter. We are updating guidance to reflect Q2 performance and the changing currency impact we saw in the quarter. On a constant currency basis, we remain on track to deliver against our full year guidance," said Kristian Talvitie, EVP and CFO, PTC.
Our FY'21 financial guidance includes the assumptions below:
In millions except per share amounts
Previous Guidance
RevisedGuidance
YoY
ARR
$1,470 - $1,500
$1,445 - $1,470
14% - 16%
Cash from Operations
~$365
~55%
Free Cash Flow (1)
~$340
~60%
Revenue (2)
$1,690 - $1,730
$1,710 - $1,740
17% - 19%
GAAP Operating Margin (2)
15% - 16%
15% - 17%
150 bps – 300 bps
Non-GAAP Operating Margin (2)
30% - 31%
31% -32%
200 bps – 300 bps
GAAP EPS (2)
$0.82 - $0.94
$1.38 - $1.59
23% - 41%
Non-GAAP EPS (2)
$3.05 - $3.25
$3.18 - $3.39
24% - 32%
(1)
Cash from operations and free cash flow include ~$16 million of restructuring payments, ~$14 million of acquisition-related payments, ~$14 million un-forecasted payment related to a non-U.S. tax dispute, and ~$8 million of incremental interest related to the Arena acquisition; free cash flow is net of capital expenditures of ~$25 million.
(2)
The FY'21 non-GAAP guidance excludes the estimated items outlined in the table below, as well as any additional tax effects and discrete tax items (which are not known or reflected). Our FY'21 non-GAAP guidance also excludes tax expense of ~$34 million related to a non-US tax exposure primarily related to foreign withholding taxes and a tax benefit of ~$42 million related to Arena Solutions.
In millions
FY'21
Acquisition-related charges
$14
Intangible asset amortization expense
$59
Stock-based compensation expense
$186
Restructuring charges
$1
Total Estimated Pre-Tax GAAP adjustments
$260
PTC's Fiscal Second Quarter 2021 Results Conference Call
The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, April 28, 2021.
To participate in the live conference call, dial (833) 670-0719 or (236) 714-2933 and provide the passcode 5879049, 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 the first six months of FY'21, we incurred tax expense related to a reserve for a South Korean tax exposure established in the period which is excluded from our non-GAAP financial measures as it is related to prior periods and not included in management's view of Q2'21 results for comparative purposes. In Q2'21, we incurred a tax benefit related to the release of a valuation allowance as a result of the Arena acquisition. 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. As a reminder, following the acquisition of Arena Solutions, we intend to target a Debt/EBITDA ratio of 3x and will assess stock repurchases in that context. 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 Change Metric - We present CC information for ARR and revenue to provide a framework for assessing how our underlying business performed excluding the effects of foreign currency rate fluctuations. To present CC information, current 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.
Operating Measures ARR - To help investors understand and assess the performance of our business as an 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.
Deferred ARR (DARR) - DARR represents the incremental annualized exit value of customer contracts that are committed as of the end of the reporting period to start or increase in value in a future period.
Because these measures represent the annualized value of customer contracts as of a point in time, they do not represent revenue for any particular period or remaining revenue that will be recognized in future periods.
Bookings - We define Bookings as the annualized value, based on the final month of the contract, of new renewable software contracts committed to in a period. For contracts with terms of less than one year that are not associated with an existing contract, the booking is equal to the total contract value.
Bookings can flow into ARR or DARR, depending on the start date of the contract, or in the case of ramp deals, the start dates of each subsequent tranche of the ramp.
Forward-Looking Statements Statements in this press release that are not historic facts, including statements about our future financial and growth expectations and targets, debt repayment 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; we may be unable to generate sufficient operating cash flow to repay our outstanding 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 repayment and/or repurchases; foreign exchange rates may differ materially from those we expect; and orders associated with minimum purchase 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
PTC Investor Relations Contact Emily Walt
Senior Director, Investor Relationsewalt@ptc.com
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended
Six Months Ended
March 31,
March 28,
2021
2020
Revenue:
Recurring revenue
$
414,845
315,862
799,803
621,230
Perpetual license
6,922
8,218
15,385
17,216
Professional services
40,018
35,523
75,648
77,267
Total revenue (1)
461,785
359,603
890,836
715,713
Cost of revenue (2)
89,448
83,027
176,278
170,432
Gross margin
372,337
276,576
714,558
545,281
Operating expenses:
Sales and marketing (2)
129,178
107,438
253,903
215,042
Research and development (2)
72,545
59,954
143,380
125,262
General and administrative (2)
60,805
33,629
110,333
78,186
Amortization of acquired intangible assets
7,650
7,288
14,197
14,065
Restructuring and other charges, net
469
18,242
716
32,276
Total operating expenses
270,647
226,551
522,529
464,831
Operating income
101,690
50,025
192,029
80,450
Other expense, net
(15,333)
(34,247)
(28,265)
(45,641)
Income before income taxes
86,357
15,778
163,764
34,809
Provision (benefit) for income taxes
(22,905)
8,622
30,987
(7,802)
Net income
109,262
7,156
132,777
42,611
Earnings per share:
Basic
0.94
0.06
1.14
0.37
Weighted average shares outstanding
116,777
115,606
116,587
115,401
Diluted
0.92
1.13
118,331
116,017
117,966
115,856
(1) See supplemental financial data for revenue by license, support, and professional services. FY'21 recurring revenue includes a $3.8 million adjustment related to the fair value of acquired deferred revenue.
(2) 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)
198,011
127,607
375,186
251,037
Support and cloud services revenue (2)
223,756
196,473
440,002
387,409
Professional services revenue
Total revenue (2)
(1) License revenue includes the portion of subscription revenue allocated to license.
(2) FY'21 support and cloud services revenue includes a $3.8 million adjustment related to the fair value of acquired deferred revenue.
The amounts in the income statement include stock-based compensation as follows:
Cost of revenue
4,506
3,000
8,940
6,043
Sales and marketing
13,305
7,146
28,304
14,598
Research and development
7,921
4,765
16,364
11,697
General and administrative
19,008
5,573
37,220
16,082
Total stock-based compensation
44,740
20,484
90,828
48,420
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
GAAP gross margin
Stock-based compensation
Amortization of acquired intangible assets included in cost of revenue
7,117
6,879
13,384
13,678
Non-GAAP gross margin
383,960
286,455
736,882
565,002
GAAP operating income
14,767
14,167
27,581
27,743
Acquisition-related and other transactional charges
10,310
261
14,226
7,390
Non-GAAP operating income (1)
171,976
103,179
325,380
196,279
GAAP net income
Non-operating charges (2)
-
15,000
Income tax adjustments (3)
(51,703)
(6,855)
(24,552)
(38,821)
Non-GAAP net income
127,845
68,455
241,576
134,619
GAAP diluted earnings per share
0.38
0.18
0.77
0.42
Amortization of acquired intangibles
0.12
0.23
0.24
0.09
0.16
0.01
0.28
Non-operating charges
0.13
Income tax adjustments
(0.44)
(0.06)
(0.21)
(0.34)
Non-GAAP diluted earnings per share
1.08
0.59
2.05
1.16
(1) Operating margin impact of non-GAAP adjustments:
GAAP operating margin
22.0
%
13.9
21.6
11.2
9.7
5.7
10.2
6.8
3.2
3.9
3.1
2.2
0.1
1.6
1.0
5.1
4.5
Non-GAAP operating margin
37.2
28.7
36.5
27.4
We recognized $15 million of expense in the second quarter of 2020 related to penalties for the early redemption of the 6.000% Senior Notes due in 2024.
(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 2021 and 2020 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. In Q2'21 and Q1'20, our GAAP results included 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 first six months of FY'21 exclude tax expense of $34.2 million related to a non-U.S. tax exposure, primarily related to foreign withholding taxes.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30,
ASSETS
Cash and cash equivalents
326,081
275,458
Marketable securities
59,099
Accounts receivable, net
434,533
415,221
Property and equipment, net
97,260
101,499
Goodwill and acquired intangible assets, net
2,603,942
1,863,356
Lease assets, net
148,684
149,933
Other assets
570,721
518,172
Total assets
4,181,221
3,382,738
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred revenue
492,421
426,465
Debt, net of deferred issuance costs
1,508,389
1,005,314
Lease obligations
206,384
215,023
Other liabilities
323,494
297,688
Stockholders' equity
1,650,533
1,438,248
Total liabilities and stockholders' equity
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Depreciation and amortization
21,334
20,605
40,169
40,193
Amortization of right-of-use lease assets
9,565
10,386
18,956
19,143
Accounts receivable
(20,169)
(14,127)
(9,854)
20,187
Accounts payable and accruals
(4,025)
17,476
(896)
1,954
53,061
52,345
52,210
17,393
Income taxes
(49,481)
(1,113)
(4,944)
(43,815)
Other
(42,595)
(25,395)
(83,792)
(50,757)
Net cash provided by operating activities
121,692
87,817
235,454
95,329
Capital expenditures
(5,385)
(5,536)
(8,242)
(10,243)
Acquisition of businesses, net of cash acquired (1)
(717,198)
(771)
(468,520)
Borrowings (payments) on debt, net
520,000
502,000
975,000
Net proceeds associated with issuance of common stock
10,484
8,980
Payments of withholding taxes in connection with vesting of stock-based awards
(2,742)
(722)
(27,242)
(23,571)
Debt Issuance Costs
(15,261)
(16,266)
Net proceeds from (purchases of) marketable securities (2)
(87)
58,469
(180)
Other financing & investing activities
5,556
3,070
(3,632)
2,200
Foreign exchange impact on cash
(5,010)
(7,731)
543
(5,740)
Net change in cash, cash equivalents, and restricted cash
(72,603)
589,759
50,636
556,989
Cash, cash equivalents, and restricted cash, beginning of period
399,199
237,919
275,960
270,689
Cash, cash equivalents, and restricted cash, end of period
326,596
827,678
Cash provided by operating activities
Free cash flow (3)
116,307
82,281
227,212
85,086
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.
Free cash flow includes $4.5 million and $11.7 million of restructuring payments in the three and six months ended March 31, 2021, respectively, compared with $18.0 million and $21.3 million in the three and six months ended March 28, 2020. Free cash flow includes $8.2 million and $11.1 million of acquisition-related payments for the three and six months ended March 31, 2021, respectively, compared with $2.1 million and $8.6 million in the three and six months ended March 28, 2020.
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SOURCE PTC Inc.