PTC Announces Fiscal Second Quarter 2020 Results

PTC’s Fiscal Second Quarter 2020 Results Conference Call, Prepared Remarks and Data Tables

Prepared remarks and financial data tables have been posted to the Investor Relations section of our website at ptc.com. The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, April 29, 2020.

To access the live webcast, we recommend you visit PTC’s Investor Relations website at investor.ptc.com 15 minutes before the scheduled start time to download any necessary audio or plug-in software.

To participate in the live conference call, dial 866-987-6881 or 270-215-9571 and provide the conference ID: 1299773. The call will be recorded, and replay will be available via webcast on PTC’s Investor Relations website.

 
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 
Revenue:
Recurring revenue

$

315,863

 

$

239,185

 

$

621,231

 

$

490,623

 

Perpetual license

 

8,217

 

 

10,336

 

 

17,215

 

 

52,141

 

Professional services

 

35,523

 

 

40,930

 

 

77,267

 

 

82,376

 

Total revenue (1)

 

359,603

 

 

290,451

 

 

715,713

 

 

625,140

 

 
Cost of revenue

 

83,027

 

 

79,904

 

 

170,432

 

 

157,256

 

 
Gross margin

 

276,576

 

 

210,547

 

 

545,281

 

 

467,884

 

 
Operating expenses:
Sales and marketing (2)

 

107,438

 

 

103,722

 

 

215,042

 

 

207,940

 

Research and development (2)

 

59,954

 

 

61,402

 

 

125,262

 

 

122,184

 

General and administrative (2)

 

33,629

 

 

35,371

 

 

78,186

 

 

73,235

 

Amortization of acquired intangible assets

 

7,288

 

 

5,930

 

 

14,065

 

 

11,866

 

Restructuring and other charges, net

 

18,242

 

 

26,980

 

 

32,276

 

 

45,473

 

Total operating expenses

 

226,551

 

 

233,405

 

 

464,831

 

 

460,698

 

 
Operating income (loss)

 

50,025

 

 

(22,858

)

 

80,450

 

 

7,186

 

Other expense, net

 

(34,247

)

 

(10,562

)

 

(45,641

)

 

(20,184

)

Income (loss) before income taxes

 

15,778

 

 

(33,420

)

 

34,809

 

 

(12,998

)

Provision (benefit) for income taxes

 

8,622

 

 

10,093

 

 

(7,802

)

 

9,530

 

Net income (loss)

$

7,156

 

$

(43,513

)

$

42,611

 

$

(22,528

)

 
Earnings (loss) per share:
Basic

$

0.06

 

$

(0.37

)

$

0.37

 

$

(0.19

)

Weighted average shares outstanding

 

115,606

 

 

118,461

 

 

115,401

 

 

118,392

 

 
Diluted

$

0.06

 

$

(0.37

)

$

0.37

 

$

(0.19

)

Weighted average shares outstanding

 

116,017

 

 

118,461

 

 

115,856

 

 

118,392

 

(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 Six Months Ended
March 28, March 30, March 28, March 30,

2020

2019

2020

2019

License revenue (1)

$

127,607

$

61,876

$

251,037

$

167,198

Support and cloud services revenue

 

196,473

 

187,645

 

387,409

 

375,566

Professional services revenue

 

35,523

 

40,930

 

77,267

 

82,376

Total revenue

$

359,603

$

290,451

$

715,713

$

625,140

 
(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 Six Months Ended
March 28, March 30, March 28, March 30,

2020

2019

2020

2019

Cost of revenue

$

3,000

$

3,112

$

6,043

$

6,223

Sales and marketing

 

7,146

 

9,522

 

14,598

 

19,244

Research and development

 

4,765

 

5,190

 

11,697

 

10,090

General and administrative

 

5,573

 

9,143

 

16,082

 

20,817

Total stock-based compensation

$

20,484

$

26,967

$

48,420

$

56,374

 
PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
 
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 
GAAP revenue

$

359,603

 

$

290,451

 

$

715,713

 

$

625,140

 

Fair value adjustment of acquired deferred revenue

 

-

 

 

198

 

 

-

 

 

471

 

Non-GAAP revenue

$

359,603

 

$

290,649

 

$

715,713

 

$

625,611

 

 
GAAP gross margin

$

276,576

 

$

210,547

 

$

545,281

 

$

467,884

 

Fair value adjustment of acquired deferred revenue

 

-

 

 

198

 

 

-

 

 

471

 

Fair value adjustment to deferred services cost

 

-

 

 

(77

)

 

-

 

 

(162

)

Stock-based compensation

 

3,000

 

 

3,112

 

 

6,043

 

 

6,223

 

Amortization of acquired intangible assets included in cost of revenue

 

6,879

 

 

6,842

 

 

13,678

 

 

13,559

 

Non-GAAP gross margin

$

286,455

 

$

220,622

 

$

565,002

 

$

487,975

 

 
GAAP operating income (loss)

$

50,025

 

$

(22,858

)

$

80,450

 

$

7,186

 

Fair value adjustment of acquired deferred revenue

 

-

 

 

198

 

 

-

 

 

471

 

Fair value adjustment to deferred services cost

 

-

 

 

(77

)

 

-

 

 

(162

)

Stock-based compensation

 

20,484

 

 

26,967

 

 

48,420

 

 

56,374

 

Amortization of acquired intangible assets included in cost of revenue

 

6,879

 

 

6,842

 

 

13,678

 

 

13,559

 

Amortization of acquired intangible assets

 

7,288

 

 

5,930

 

 

14,065

 

 

11,866

 

Acquisition-related and other transactional charges included in general and administrative costs

 

261

 

 

372

 

 

7,390

 

 

791

 

Restructuring and other charges, net

 

18,242

 

 

26,980

 

 

32,276

 

 

45,473

 

Non-GAAP operating income (1)

$

103,179

 

$

44,354

 

$

196,279

 

$

135,558

 

 
GAAP net income (loss)

$

7,156

 

$

(43,513

)

$

42,611

 

$

(22,528

)

Fair value adjustment of acquired deferred revenue

 

-

 

 

198

 

 

-

 

 

471

 

Fair value adjustment to deferred services cost

 

-

 

 

(77

)

 

-

 

 

(162

)

Stock-based compensation

 

20,484

 

 

26,967

 

 

48,420

 

 

56,374

 

Amortization of acquired intangible assets included in cost of revenue

 

6,879

 

 

6,842

 

 

13,678

 

 

13,559

 

Amortization of acquired intangible assets

 

7,288

 

 

5,930

 

 

14,065

 

 

11,866

 

Acquisition-related and other transactional charges included in general and administrative costs

 

261

 

 

372

 

 

7,390

 

 

791

 

Restructuring and other charges, net

 

18,242

 

 

26,980

 

 

32,276

 

 

45,473

 

Debt early redemption premium

 

15,000

 

 

-

 

 

15,000

 

 

-

 

Income tax adjustments (2)

 

(6,855

)

 

2,138

 

 

(38,821

)

 

(12,718

)

Non-GAAP net income

$

68,455

 

$

25,837

 

$

134,619

 

$

93,126

 

 
GAAP diluted earnings (loss) per share

$

0.06

 

$

(0.37

)

$

0.37

 

$

(0.19

)

Fair value adjustment of acquired deferred revenue

 

-

 

 

-

 

 

-

 

 

-

 

Stock-based compensation

 

0.18

 

 

0.23

 

 

0.42

 

 

0.47

 

Amortization of acquired intangibles

 

0.12

 

 

0.11

 

 

0.24

 

 

0.21

 

Acquisition-related and other transactional charges

 

-

 

 

-

 

 

0.06

 

 

0.01

 

Restructuring and other charges, net

 

0.16

 

 

0.23

 

 

0.28

 

 

0.38

 

Debt early redemption premium

 

0.13

 

 

-

 

 

0.13

 

 

-

 

Income tax adjustments

 

(0.06

)

 

0.02

 

 

(0.34

)

 

(0.11

)

Non-GAAP diluted earnings per share

$

0.59

 

$

0.22

 

$

1.16

 

$

0.78

 

 
GAAP diluted weighted average shares outstanding

 

116,017

 

 

118,461

 

 

115,856

 

 

118,392

 

Dilutive effect of stock-based compensation plans

 

-

 

 

881

 

 

-

 

 

1,098

 

Non-GAAP diluted weighted average shares outstanding

 

116,017

 

 

119,342

 

 

115,856

 

 

119,490

 

 

(1)

Operating margin impact of non-GAAP adjustments:
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

GAAP operating margin

 

13.9

%

 

-7.9

%

 

11.2

%

 

1.1

%

Fair value adjustment of acquired deferred revenue

 

0.0

%

 

0.1

%

 

0.0

%

 

0.1

%

Fair value adjustment to deferred services cost

 

0.0

%

 

0.0

%

 

0.0

%

 

0.0

%

Stock-based compensation

 

5.7

%

 

9.3

%

 

6.8

%

 

9.0

%

Amortization of acquired intangibles

 

3.9

%

 

4.4

%

 

3.9

%

 

4.1

%

Acquisition-related and other transactional charges

 

0.1

%

 

0.1

%

 

1.2

%

 

0.1

%

Restructuring and other charges, net

 

5.1

%

 

9.3

%

 

4.5

%

 

7.3

%

Non-GAAP operating margin

 

28.7

%

 

15.3

%

 

27.4

%

 

21.7

%

 

(2)

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 2020 and 2019 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. 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.
 
PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
March 28, September 30,

2020

2019

 
ASSETS
 
Cash and cash equivalents (1)

$

826,776

$

269,579

Marketable securities

 

56,941

 

57,435

Accounts receivable, net

 

352,673

 

372,743

Property and equipment, net

 

104,147

 

105,531

Goodwill and acquired intangible assets, net

 

1,854,272

 

1,408,128

Lease assets, net (2)

 

157,016

 

-

Other assets

 

514,646

 

451,172

 
Total assets

$

3,866,471

$

2,664,588

 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Deferred revenue

$

417,202

$

396,632

Debt, net of deferred issuance costs

 

1,630,722

 

669,134

Lease obligations (2)

 

224,158

 

-

Other liabilities

 

320,308

 

396,824

Stockholders' equity

 

1,274,081

 

1,201,998

 
Total liabilities and stockholders' equity

$

3,866,471

$

2,664,588

(1)

We have notified bondholders that we will redeem the $500 million of 2024 Senior Notes in May 2020. Of the March cash balance, $530 million is reserved for that redemption.

(2)

In the first quarter of 2020, we adopted Accounting Standards Update 2016-02, Leases (Topic 842).

 
PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 
Cash flows from operating activities:
Net income (loss)

$

7,156

 

$

(43,513

)

$

42,611

 

$

(22,528

)

Stock-based compensation

 

20,484

 

 

26,967

 

 

48,420

 

 

56,374

 

Depreciation and amortization

 

20,605

 

 

19,505

 

 

40,193

 

 

39,558

 

Accounts receivable

 

(14,127

)

 

30,476

 

 

20,187

 

 

54,501

 

Accounts payable and accruals

 

23,086

 

 

9,264

 

 

7,564

 

 

(27,868

)

Deferred revenue

 

52,345

 

 

58,767

 

 

17,393

 

 

36,947

 

Income taxes

 

(1,113

)

 

5,991

 

 

(43,815

)

 

(15,677

)

Other

 

(20,619

)

 

33,673

 

 

(37,224

)

 

41,037

 

Net cash provided by operating activities

 

87,817

 

 

141,130

 

 

95,329

 

 

162,344

 

 
Capital expenditures

 

(5,536

)

 

(20,936

)

 

(10,243

)

 

(51,268

)

Acquisition of businesses, net of cash acquired (1)

 

(771

)

 

103

 

 

(468,520

)

 

(69,453

)

Borrowings (payments) on debt, net

 

520,000

 

 

(40,000

)

 

975,000

 

 

95,000

 

Net proceeds associated with issuance of common stock

 

8,980

 

 

8,798

 

 

8,980

 

 

4,158

 

Repurchases of common stock

 

-

 

 

(64,994

)

 

-

 

 

(64,994

)

Payments of withholding taxes in connection with
vesting of stock-based awards

 

(722

)

 

(703

)

 

(23,571

)

 

(34,491

)

Proceeds from (purchase of) investment

 

-

 

 

(7,500

)

 

-

 

 

(7,500

)

Contingent consideration

 

-

 

 

-

 

 

-

 

 

(1,575

)

Credit facility origination costs

 

(15,261

)

 

-

 

 

(16,266

)

 

-

 

Other financing & investing activities

 

2,983

 

 

1,205

 

 

2,020

 

 

(119

)

Foreign exchange impact on cash

 

(7,731

)

 

196

 

 

(5,740

)

 

2,237

 

 
Net change in cash, cash equivalents, and restricted cash

 

589,759

 

 

17,299

 

 

556,989

 

 

34,339

 

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

 

237,919

 

 

278,133

 

 

270,689

 

 

261,093

 

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

$

827,678

 

$

295,432

 

$

827,678

 

$

295,432

 

 
 
Three Months Ended Six Months Ended
March 28, March 30, March 28, March 30,

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Cash provided by operating activities

 

87,817

 

 

141,130

 

 

95,329

 

 

162,344

 

Capital expenditures

 

(5,536

)

 

(20,936

)

 

(10,243

)

 

(51,268

)

Free cash flow (2)

 

82,281

 

 

120,194

 

 

85,086

 

 

111,076

 

(1)

In the three months ended December 28, 2019, we acquired Onshape for $468 million, net of cash acquired. In the three months ended December 29, 2018, we acquired Frustum for $70 million, net of cash acquired.

(2)

Free cash flow includes $18.0 million and $21.3 million of restructuring payments in the three and six months ended March 28, 2020, respectively, compared with $9.6 million and $17.9 million in the three and six months ended March 30, 2019. Free cash flow includes $2.1 million and $8.6 million of acquisition-related payments for the three and six months ended March 28, 2020, respectively. There were no acquisition-related payments in the first half of 2019.

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