PTC Announces Fiscal Third Quarter 2020 Results

Solid Q3’20 ARR, Revenue, Operating Margin and EPS Performance; Tightens FY’20 Guidance Range

BOSTON — (BUSINESS WIRE) — July 29, 2020 — PTC (NASDAQ: PTC) today reported financial results for its fiscal third quarter ended June 27, 2020.

“We delivered solid third quarter performance despite the challenging macro environment, reflecting strong execution by our global team, the mission-critical nature of our broad technology portfolio, and the strength of our subscription model. We continue to support our customers with increasingly relevant and strategic solutions that enable global team collaboration, remote asset management, remote collaboration and training of front-line workers, and seamless availability through our SaaS-based technologies,” said James Heppelmann, President and CEO, PTC.

“While the current macro environment headwinds appear likely to persist in the coming quarters, we believe the disruptive nature of this crisis creates a unique opportunity to deepen our customer relationships and drive further innovation across our product portfolio, and that we will emerge even better positioned when the economy recovers,” concluded Heppelmann.

Third quarter 2020 highlights1

Key operating and financial highlights are set forth 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.

  • ARR was $1.21 billion. Growth of 9%, or 10% in constant currency, compared to Q3’19 reflects solid performance in our Core and Growth businesses, and in our global channel.
  • Revenue was $352 million in Q3’20. Growth of 19% compared to Q3’19 was driven by strength across our Core and Growth businesses, as well as the impact of ASC 606 and related business policy changes.
  • Cash from operations was $105 million in Q3’20, compared to $68 million in Q3’19. Free cash flow was $99 million, compared to $59 million in Q3’19. Cash flow from operations and free cash flow included $13 million and $3 million in restructuring and other related payments in Q3’20 and Q3’19 respectively.
  • Operating margin was 18% in Q3’20 compared to 3% in Q3’19; non-GAAP operating margin was 29%, compared to 13% in Q3’19.
  • Total cash, cash equivalents, and marketable securities as of the end of Q3’20 was $435 million; total gross borrowings was $1.1 billion.
_________

1 We include operating and non-GAAP financial measures in our operational highlights. We revised the definition of ARR on September 5, 2019. The 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 2020 Outlook

“Given the durable nature of our business and continued solid execution, we remain committed to delivering solid results for the remainder of FY’20 while navigating the current backdrop of macroeconomic uncertainty,” said Kristian Talvitie, EVP and CFO, PTC.

Fiscal 2020 Guidance

Our fiscal 2020 financial outlook includes the following assumptions:

  • Impact of weak macroeconomic conditions related to COVID-19 crisis.
  • New ACV bookings decline ~25% YoY at the midpoint of guidance in the back half of the year, compared to our previous guidance of a ~30% decline YoY.
  • Churn of approximately 8%, consistent with our previous guidance.
  • Revenue growth slows quarter over quarter in Q4'20, to the mid-single digits, due primarily to the impact of ASC 606 and related business policy changes.
  • Operating expense growth in the lower single-digits YoY, consistent with our previous guidance reflecting continued cost discipline related to headcount additions, and lower variable compensation, travel, and marketing expenses.
  • GAAP tax rate is expected to be 20%, Non-GAAP tax rate is expected to be 19%.

 

 

 

In millions except per share amounts

Previous
Guidance

Revised
Guidance

YoY

ARR

$1,220 - $1,255

$1,235 - $1,255

11% - 12%

Cash from Operations

~$222

~$232

~(19)%

Free cash flow (1)

~$200

~$210

~(5)%

Revenue

$1,400 - $1,430

$1,415 - $1,430

13% - 14%

GAAP Operating Margin

13% - 14%

13% - 14%

800 - 900 bps

Non-GAAP Operating Margin (2)

27% - 28%

27% - 28%

700 - 800 bps

GAAP EPS

$0.70 - $0.84

$0.73 - $0.79

412% - 440%

Non-GAAP EPS (2)

$2.20 - $2.35

$2.28 - $2.35

39% - 43%

(1)

Cash from operations and free cash flow include ~$65 million of interest payments, ~$45 million of restructuring and ~$10 million of acquisition-related payments; free cash flow includes capital expenditures of ~$22 million.

(2)

The FY’20 non-GAAP guidance excludes the estimated items outlined in the table below, as well as any tax effects and discrete tax items (which are not known nor reflected).

       

In millions

 

 

FY’20

       

 

 

 

 

       

Acquisition-related charges

 

 

$8

       

Restructuring and other charges

 

 

$32

       

Intangible asset amortization expense

 

 

$56

       

Stock-based compensation expense

 

 

$105

       

Write-off of debt issuance costs associated with extinguished debt

 

 

$3

       

Debt early redemption premium

 

 

$15

       

Total Estimated Pre-Tax GAAP adjustments

 

 

$219


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