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Strong Performance in Fourth Fiscal Quarter and Full Year
BOSTON, Nov. 2, 2022 /PRNewswire/ -- PTC (NASDAQ: PTC) today reported financial results for its fourth fiscal quarter and full year ended September 30, 2022.
"In our fourth fiscal quarter, we again delivered strong results. We reported ARR growth of 7%, organic ARR growth of 6%, and organic constant currency growth of 15%. The Codebeamer business, which we acquired in the third quarter, continued to perform well and added an additional point of ARR growth, taking constant currency ARR growth to 16% for the 4th quarter and full year. In fiscal 2022, our cash from operations was $435 million, up 18% year over year, and our free cash flow was $416 million, up 21% year over year. While currency headwinds have impacted our ARR, our solid execution, the timing of our collections, and prudent cost controls have mitigated the impact on cash flow," said James Heppelmann, President and CEO, PTC.
"Our differentiated product portfolio and industry-leading SaaS capabilities align well to the manufacturing industry's push for digital transformation. Despite challenging economic conditions, the strong resiliency of our business due to our subscription model and our strong market position, coupled with strong execution, has allowed PTC to surpass all of our key guidance measures throughout fiscal 2022. We are positioned for continued solid performance in fiscal 2023," concluded Heppelmann.
Fourth Quarter 2022 and Full Year Highlights[1]
Key operating and financial highlights are set forth below. For additional details, please refer to the Q4'22 earnings presentation and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com. Revenue and, as a result, operating margin, operating profit, and earnings per share are impacted by revenue recognition under ASC 606.
[1] The definitions of our operating and non-GAAP financial measures 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 2023 and Q1'23 Guidance
"PTC delivered solid fourth quarter results. With strong bookings performance and significantly improved churn, we beat our ARR and free cash flow guidance for the quarter and the year. Balancing our momentum and forecast with potential macro uncertainties, we are establishing ARR guidance for fiscal 2023 that represents 10% to 14% constant currency growth over fiscal 2022. We expect revenue, which is significantly impacted by both ASC606 revenue recognition and currency fluctuations, to be approximately flat on a year over year basis. Given the resilience of the business model, our consistent execution, operational discipline and the actions we have taken to align our investments with growth expectations, we expect free cash flow of approximately $560M in fiscal 2023," said Kristian Talvitie, EVP and CFO, PTC.
"For Q1'23, we are establishing ARR guidance of 14% to 15% constant currency growth compared to Q1'22, and free cash flow guidance of approximately $165 million," concluded Talvitie.
In millions except percentages
FY'22 Actual
FY'23
Guidance
FY'23 YoY Growth
Guidance
Q1'23
Guidance
ARR at Constant Currency(1)
$1,572
$1,730 - $1,790
10% - 14%
$1,580 - $1,600
Cash from Operations(2)
$435
~$580
~33%
~$170
Free Cash Flow(2),(3)
$416
~$560
~35%
~$165
Adjusted Free Cash Flow(2),(3)
$468
~$562
~20%
~$166
Revenue
$1,933
$1,910 - $1,990
(1)% - 3%
(1)
On a constant currency basis, using our FY'23 Plan foreign exchange rates (rates as of September 30, 2022) for FY'22 actual ARR, FY'23 ARR guidance, and Q1'23 ARR guidance; FY'22 actual ARR at constant currency using our FY'22 Plan foreign exchange rates (rates as of September 30, 2021) was $1,706 million.
(2)
FY'23 cash from operations and free cash flow guidance include restructuring payments of approximately $1 million and acquisition and transaction-related payments of approximately $1 million, both of which are excluded from FY'23 adjusted free cash flow guidance; Q1'23 cash from operations and free cash flow guidance include expected restructuring payments of approximately $1 million which is excluded from Q1'23 adjusted free cash flow guidance.
(3)
Free cash flow and adjusted free cash flow guidance are net of expected capital expenditures of approximately $20 million in FY'23 and $5 million in Q1'23.
Our FY'23 and Q1'23 financial guidance includes the assumptions below:
PTC's Fiscal Fourth Quarter Results Conference Call
The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, November 2, 2022. To participate in the live conference call, dial (888) 330-2508 or (240) 789-2735 and provide the passcode 7328695, 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 and transaction-related charges included in general and administrative expenses; restructuring and other charges, net; certain non-operating charges and credits; 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 24 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2021.
Free Cash Flow and Adjusted Free Cash Flow: PTC 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 goals and intent to return approximately 50% of our free cash flow to shareholders via stock repurchases. Free cash flow is cash provided by (used in) operations net of capital expenditures. Adjusted free cash flow is free cash flow net of restructuring payments, acquisition and transaction-related payments, and non-ordinary course tax-related payments or receipts. Free cash flow and adjusted free cash flow are not measures of cash available for discretionary expenditures.
Constant Currency (CC): 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, FY'22 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, 2021, rather than the actual exchange rates in effect during that period. All discussion of FY'23 and comparative prior period ARR results (including FY'22 baseline amounts) are reflected using the foreign exchange rates as of September 30, 2022.
Operating Measures
ARR: We provide an ARR (Annual Run Rate) operating measure to help investors understand and assess the performance of our business as a SaaS and on-premises subscription company. 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.
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.
Organic Constant Currency ARR: We provide an organic constant currency ARR measure to help investors understand and assess the performance of our business without the effect of ARR (other than insignificant amounts) from acquisitions in the comparative period and foreign exchange rate fluctuations.
Because our ARR 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.
Churn: We provide churn measures to enable investors to understand and assess our customer contract retention. Churn represents the difference between the ARR amount for all subscription software, cloud, SaaS, and support contracts ended within a reporting period and the annualized renewal transactions started within a reporting period, as of the end of the reporting period.
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 effects of the COVID-19 pandemic, including supply chain disruptions, increasing interest rates and inflation, volatile foreign exchange rates and the current strength of the U.S. dollar, and the effects of the Russia/Ukraine conflict, including the effect on energy supplies to Europe, 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 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 return 50% of free cash flow to shareholders, and other uses of cash or our credit facility limits or other matters could preclude such repurchases; and foreign exchange rates may differ materially from those we expect. In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including the geographic mix of our revenue, expenses, and profits. Other risks and uncertainties that could cause actual results to differ materially from those projected are detailed from time to time in reports we file with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
About PTC (NASDAQ: PTC)
PTC enables global manufacturers to realize double-digit impact with software solutions that enable them to accelerate product and service innovation, improve operational efficiency, and increase workforce productivity. In combination with an extensive partner network, PTC provides customers flexibility in how its technology can be deployed to drive digital transformation – on premises, in the cloud, or via its pure SaaS platform. At PTC, we don't just imagine a better world, we enable it.
PTC Investor Relations Contact
Matt Shimao
SVP, Investor Relations
mshimao@ptc.com
investor@ptc.com
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended
Twelve Months Ended
September
30,
September
30,
September
30,
September
30,
2022
2021
2022
2021
Revenue:
Recurring revenue
$
463,156
$
429,350
$
1,736,188
$
1,616,328
Perpetual license
7,854
10,369
34,065
33,013
Professional services
36,915
40,937
163,094
157,818
Total revenue (1)
507,925
480,656
1,933,347
1,807,159
Cost of revenue (2)
95,530
99,748
385,980
371,102
Gross margin
412,395
380,908
1,547,367
1,436,057
Operating expenses:
Sales and marketing (2)
119,038
129,464
485,247
517,779
Research and development (2)
88,183
78,403
338,822
299,917
General and administrative (2)
50,705
48,589
204,732
206,006
Amortization of acquired intangible assets
9,105
7,688
34,970
29,396
Restructuring and other charges (credits), net
(653)
1,627
36,234
2,211
Total operating expenses
266,378
265,771
1,100,005
1,055,309
Operating income
146,017
115,137
447,362
380,748
Other income (expense), net
(8,639)
54,385
(50,264)
11,007
Income before income taxes
137,378
169,522
397,098
391,755
Provision (benefit) for income taxes
30,541
(123,421)
84,017
(85,168)
Net income
$
106,837
$
292,943
$
313,081
$
476,923
Earnings per share:
Basic
$
0.91
$
2.50
$
2.67
$
4.08
Weighted average shares outstanding
117,431
117,230
117,194
116,836
Diluted
$
0.90
$
2.46
$
2.65
$
4.03
Weighted average shares outstanding
118,634
118,921
118,233
118,367
(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.
PTC Inc.
SUPPLEMENTAL FINANCIAL DATA FOR REVENUE AND STOCK-BASED COMPENSATION
(in thousands, except per share data)
Revenue by license, support and services is as follows:
Three Months Ended
Twelve Months Ended
September
30,
September
30,
September
30,
September
30,
2022
2021
2022
2021
License revenue (1)
$
220,034
$
199,284
$
782,680
$
738,053
Support and cloud services revenue
250,976
240,435
987,573
911,288
Professional services revenue
36,915
40,937
163,094
157,818
Total revenue
$
507,925
$
480,656
$
1,933,347
$
1,807,159
(1) License revenue includes the portion of subscription revenue allocated to license.
The amounts in the income statement include stock-based compensation as follows:
Three Months Ended
Twelve Months Ended
September
30,
September
30,
September
30,
September
30,
2022
2021
2022
2021
Cost of revenue
$
4,110
$
5,229
$
22,775
$
19,263
Sales and marketing
10,911
11,179
49,467
53,712
Research and development
11,262
9,394
41,944
34,272
General and administrative
15,297
17,591
60,677
70,042
Total stock-based compensation
$
41,580
$
43,393
$
174,863
$
177,289
PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Ended
Twelve Months Ended
September
30,
September
30,
September
30,
September
30,
2022
2021
2022
2021
GAAP gross margin
$
412,395
$
380,908
$
1,547,367
$
1,436,057
Stock-based compensation
4,110
5,229
22,775
19,263
Amortization of acquired intangible assets included in cost of revenue
6,568
8,125
25,578
29,769
Non-GAAP gross margin
$
423,073
$
394,262
$
1,595,720
$
1,485,089
GAAP operating income
$
146,017
$
115,137
$
447,362
$
380,748
Stock-based compensation
41,580
43,393
174,863
177,289
Amortization of acquired intangible assets
15,673
15,813
60,548
59,165
Acquisition and transaction-related charges
1,877
166
13,185
15,010
Restructuring and other charges (credits), net
(653)
1,627
36,234
2,211
Non-GAAP operating income (1)
$
204,494
$
176,136
$
732,192
$
634,423
GAAP net income
$
106,837
$
292,943
$
313,081
$
476,923
Stock-based compensation
41,580
43,393
174,863
177,289
Amortization of acquired intangible assets
15,673
15,813
60,548
59,165
Acquisition and transaction-related charges
1,877
166
13,185
15,010
Restructuring and other charges (credits), net
(653)
1,627
36,234
2,211
Non-operating charges (credits), net (2)
(3,408)
(68,829)
(1,362)
(68,829)
Income tax adjustments (3)
(11,448)
(154,546)
(55,065)
(191,611)
Non-GAAP net income
$
150,458
$
130,567
$
541,484
$
470,158
GAAP diluted earnings per share
$
0.90
$
2.46
$
2.65
$
4.03
Stock-based compensation
0.35
0.36
1.48
1.50
Amortization of acquired intangibles
0.13
0.13
0.51
0.50
Acquisition and transaction-related charges
0.02
-
0.11
0.13
Restructuring and other charges (credits), net
(0.01)
0.01
0.31
0.02
Non-operating charges (credits), net
(0.03)
(0.58)
(0.01)
(0.58)
Income tax adjustments
(0.10)
(1.30)
(0.47)
(1.62)
Non-GAAP diluted earnings per share
$
1.27
$
1.10
$
4.58
$
3.97
(1) Operating margin impact of non-GAAP adjustments:
Three Months Ended
Twelve Months Ended
September
30,
September
30,
September
30,
September
30,
2022
2021
2022
2021
GAAP operating margin
28.7
%
24.0
%
23.1
%
21.1
%
Stock-based compensation
8.2
%
9.0
%
9.0
%
9.8
%
Amortization of acquired intangibles
3.1
%
3.3
%
3.1
%
3.3
%
Acquisition and transaction-related charges
0.4
%
0.0
%
0.7
%
0.8
%
Restructuring and other charges (credits), net
(0.1)
%
0.3
%
1.9
%
0.1
%
Non-GAAP operating margin
40.3
%
36.6
%
37.9
%
35.1
%
(2) Credits for Q422 include a $3.4 million gain on the sale of an asset. Net credits for FY22 include a $29.8 million gain on the sale of a portion of our
PLM services business, a $3.4 million gain on the sale of an asset, and a $3.0 million gain on the sale of an investment, offset by a $34.8 million charge
from the reduction in value of an equity investment in a publicly-traded company. Non-operating credits for Q421 and FY21 include a $68.8 million gain
associated with an increase in value of an equity investment in a publicly-traded company.
(3) 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. In FY22, adjustments include tax expense of $15.5 million related to the sale of our PLM services business, of
which $8.1 million pertains to the basis difference in goodwill. Our Q421 and FY21 GAAP results included benefits of $137.4 million and $179.7 million,
respectively, related to the release of the valuation allowance on the majority of our U.S. net deferred tax assets. As we were profitable on a non-GAAP
basis, the FY21 tax provision was calculated assuming there was no valuation allowance. Additionally, our non-GAAP results for FY21 excluded tax
expenses of $34.8 million related to a non-U.S. prior period tax exposure, primarily related to foreign withholding taxes.
PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30,
September 30,
2022
2021
ASSETS
Cash and cash equivalents
$
272,182
$
326,532
Accounts receivable, net
636,556
541,072
Property and equipment, net
98,101
100,237
Goodwill and acquired intangible assets, net
2,736,372
2,570,854
Lease assets, net
137,780
152,337
Other assets
806,277
816,528
Total assets
$
4,687,268
$
4,507,560
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred revenue
$
520,333
$
497,677
Debt, net of deferred issuance costs
1,350,628
1,439,471
Lease obligations
189,575
208,799
Other liabilities
330,698
323,145
Stockholders' equity
2,296,034
2,038,468
Total liabilities and stockholders' equity
$
4,687,268
$
4,507,560
PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
Twelve Months Ended
September 30,
September 30,
September 30,
September 30,
2022
2021
2022
2021
Cash flows from operating activities:
Net income
$
106,837
$
292,943
$
313,081
$
476,923
Stock-based compensation
41,580
43,393
174,863
177,289
Depreciation and amortization
22,238
22,569
87,694
85,239
Amortization of right-of-use lease assets
8,198
9,264
34,346
37,295
Loss (gain) on investment
-
(68,829)
31,854
(68,829)
Gain on divestiture of business
-
-
(29,808)
-
Accounts receivable
(190,235)
(115,308)
(165,006)
(119,418)
Accounts payable and accruals
17,080
25,916
312
41,871
Deferred revenue
39,549
27,969
57,586
58,702
Income taxes
21,510
(130,602)
27,634
(144,126)
Other
(28,258)
(61,994)
(97,230)
(176,137)
Net cash provided by operating activities
38,499
45,321
435,326
368,809
Capital expenditures
(9,517)
(13,051)
(19,496)
(24,713)
Acquisition of businesses, net of cash acquired (1)
(7,969)
(251)
(282,943)
(718,030)
Purchase of intangible assets
(998)
-
(6,451)
(550)
Purchase of investments
-
(2,000)
-
(4,000)
Borrowings (payments) on debt, net
(75,000)
(40,000)
(91,000)
432,000
Repurchases of common stock
-
(30,000)
(125,000)
(30,000)
Net proceeds associated with issuance of common stock
10,350
11,091
21,207
21,575
Payments of withholding taxes in connection with vesting
of stock-based awards
(6,135)
(10,742)
(68,991)
(52,957)
Net proceeds from marketable securities (2)
-
-
-
58,469
Net proceeds from sale of investments (3)
-
-
46,906
-
Divestitures of businesses and assets, net (4)
-
-
32,518
-
Other financing & investing activities
10,164
2,181
27,968
611
Foreign exchange impact on cash
(9,548)
(1,773)
(24,203)
(127)
Net change in cash, cash equivalents, and restricted cash
(50,154)
(39,224)
(54,159)
51,087
Cash, cash equivalents, and restricted cash, beginning of period
323,042
366,271
327,047
275,960
Cash, cash equivalents, and restricted cash, end of period
$
272,888
$
327,047
$
272,888
$
327,047
(1) In Q322, we acquired Intland for approximately $278 million, net of cash acquired. In Q221, we acquired Arena for approximately
$715 million, net of cash acquired.
(2) In Q121, we sold all of our available-for-sale securities.
(3) In Q222, we sold an equity investment in a publicly-traded company for $42.7 million.
(4) In Q322, we sold a portion of our PLM services business.
PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands)
Three Months Ended
Twelve Months Ended
September
30,
September
30,
September
30,
September
30,
2022
2021
2022
2021
Cash provided by operating activities
$
38,499
$
45,321
$
435,326
$
368,809
Capital expenditures
(9,517)
(13,051)
(19,496)
(24,713)
Free cash flow
$
28,982
$
32,270
$
415,830
$
344,096
Restructuring and other related payments
2,314
748
40,826
14,464
Acquisition and transaction-related payments
1,718
139
11,834
14,981
Non-ordinary course tax payment (1)
-
-
-
17,907
Adjusted free cash flow
$
33,014
$
33,157
$
468,490
$
391,448
(1) In 2021, we made payments related to a non-U.S. prior period tax exposure, primarily related to foreign withholding taxes.
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SOURCE PTC Inc.