Date of report (Date of earliest event reported)
|
October 28, 2015
|
PTC Inc.
|
|
(Exact Name of Registrant as Specified in Its Charter)
|
|
Massachusetts
|
|
(State or Other Jurisdiction of Incorporation)
|
|
0-18059
|
04-2866152
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
140 Kendrick Street
Needham, Massachusetts
|
02494-2714
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
(781) 370-5000
|
|
(Registrant's Telephone Number, Including Area Code)
|
|
(Former Name or Former Address, if Changed Since Last Report)
|
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
|
|
☐
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
99.1
|
PTC Inc. press release dated October 28, 2015.
|
99.2
|
Prepared remarks posted by PTC Inc. on October 28, 2015.
|
PTC Inc.
|
|||
Date: October 28, 2015
|
By:
|
/s/Andrew Miller
|
|
Andrew Miller
|
|||
Executive Vice President and Chief Financial Officer
|
|||
¡
|
For the quarter, subscription bookings were 20% of license and subscription (L&S) bookings, up from 4% a year ago. For the year, subscription bookings were 17% of L&S bookings, up from 8% a year ago. As a rule of thumb, on an annual basis, every 1% change in subscription mix will raise or lower revenue by $3 million, non-GAAP operating margin by 20 basis points and non-GAAP EPS by $0.02.
|
¡
|
On a year over year, constant currency basis, software revenue was down 4% in Q4 FY'15 and was up 3% for FY'15 on both a GAAP and a non-GAAP basis.
|
¡
|
We added 108 new IoT customers during the quarter, bringing our total added for FY'15 to 290.
|
¡
|
In the quarter, we had 21 large deals (transactions with greater than $1 million of L&S bookings from a single customer), up from 18 in the fourth quarter FY'14; however, total bookings from large deals was down from Q4 FY'14. We did not have any mega deals (transactions with greater than $5 million of L&S bookings from a single customer) in Q4 FY'15, down from 2 in the fourth quarter FY'14. For the year, we had 57 large deals, down from 70 in FY'14. We had 1 mega deal in FY'15, down from 6 in FY'14.
|
¡
|
Q4 FY'15 GAAP operating margin was -2.3% (including $67.8 million of pension plan termination costs) and non-GAAP operating margin was 28%. FY'15 GAAP operating margin was 4.5% and non-GAAP operating margin was 24.2%.
|
¡
|
Cash used by operations for Q4 FY'15 was $12.6 million, including $26 million paid in connection with the termination of a U.S. pension plan. We repurchased $15 million of shares in Q4 FY'15 and Q4 FY'15 DSO was 56 days. For FY'15, cash flow from operations was $179.9 million, and we ended the year with total cash and cash equivalents of $273.4 million and total debt of $668 million.
|
Q1'16
|
Q1'16
|
FY'16
|
FY'16
|
|||||||||||||
($ in millions)
|
Low
|
High
|
Low
|
High
|
||||||||||||
Subscription ACV(1)
|
$
|
6
|
$
|
6
|
$
|
40
|
$
|
45
|
||||||||
License and Subscription Bookings(1)
|
62
|
70
|
320
|
350
|
||||||||||||
Subscription % of Bookings(1)
|
18
|
%
|
18
|
%
|
25
|
%
|
25
|
%
|
||||||||
Subscription Revenue
|
$
|
20
|
$
|
20
|
$
|
90
|
$
|
90
|
||||||||
Support Revenue
|
170
|
170
|
670
|
670
|
||||||||||||
Perpetual License Revenue
|
52
|
57
|
240
|
260
|
||||||||||||
Total Software Revenue
|
242
|
247
|
1,000
|
1,020
|
||||||||||||
Professional Services Revenue
|
48
|
48
|
200
|
200
|
||||||||||||
Total Revenue
|
$
|
290
|
$
|
295
|
$
|
1,200
|
$
|
1,220
|
||||||||
Operating Expense (GAAP)
|
$
|
188
|
$
|
190
|
$
|
714
|
$
|
729
|
||||||||
Operating Expense (Non-GAAP)
|
158
|
160
|
627
|
642
|
||||||||||||
Operating Margin (GAAP)
|
9
|
%
|
10
|
%
|
13
|
%
|
14
|
%
|
||||||||
Operating Margin (Non-GAAP)
|
22
|
%
|
22
|
%
|
23
|
%
|
23
|
%
|
||||||||
Tax Rate (GAAP)
|
20
|
%
|
20
|
%
|
20
|
%
|
20
|
%
|
||||||||
Tax Rate (Non-GAAP)
|
18
|
%
|
18
|
%
|
20
|
%
|
15
|
%
|
||||||||
Shares Outstanding
|
116
|
116
|
116
|
116
|
||||||||||||
EPS (GAAP)
|
$
|
0.15
|
$
|
0.17
|
$
|
0.95
|
$
|
1.05
|
||||||||
EPS (Non-GAAP)
|
$
|
0.40
|
$
|
0.45
|
$
|
1.80
|
$
|
1.90
|
||||||||
Free Cash Flow(1)
|
$
|
215
|
$
|
225
|
($ in millions)
|
Q1'16
|
FY'16
|
||||||
Effect of acquisition accounting on fair value of acquired deferred revenue
|
$
|
-
|
$
|
1
|
||||
Stock-based compensation expense
|
24
|
64
|
||||||
Intangible asset amortization expense
|
13
|
50
|
||||||
Acquisition-related charges
|
1
|
1
|
||||||
Total Estimated GAAP adjustments
|
$
|
38
|
$
|
116
|
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,
|
||||||||||||||||
2015
|
2014
|
2015
|
2014
|
||||||||||||||||
Revenue:
|
|||||||||||||||||||
License and subscription (L&S)
|
$
|
99,149
|
$
|
120,625
|
$
|
347,999
|
$
|
389,739
|
|||||||||||
Support
|
165,482
|
180,090
|
681,524
|
688,502
|
|||||||||||||||
Total software revenue
|
264,631
|
300,715
|
1,029,523
|
1,078,241
|
|||||||||||||||
Professional services
|
47,937
|
65,993
|
225,719
|
278,726
|
|||||||||||||||
Total revenue
|
312,568
|
366,708
|
1,255,242
|
1,356,967
|
|||||||||||||||
Cost of revenue:
|
|||||||||||||||||||
Cost of L&S revenue (1)
|
13,814
|
12,550
|
53,163
|
45,005
|
|||||||||||||||
Cost of support revenue (1)
|
19,653
|
22,105
|
82,829
|
84,703
|
|||||||||||||||
Total cost of software revenue
|
33,467
|
34,655
|
135,992
|
129,708
|
|||||||||||||||
Cost of professional services revenue (1)
|
42,895
|
61,199
|
198,742
|
243,975
|
|||||||||||||||
Total cost of revenue
|
76,362
|
95,854
|
334,734
|
373,683
|
|||||||||||||||
Gross margin
|
236,206
|
270,854
|
920,508
|
983,284
|
|||||||||||||||
Operating expenses:
|
|||||||||||||||||||
Sales and marketing (1)
|
82,692
|
95,835
|
338,777
|
357,447
|
|||||||||||||||
Research and development (1)
|
52,180
|
60,387
|
227,513
|
226,496
|
|||||||||||||||
General and administrative (1)
|
99,182
|
43,344
|
218,524
|
142,232
|
|||||||||||||||
Amortization of acquired intangible assets
|
8,438
|
8,355
|
36,129
|
32,127
|
|||||||||||||||
Restructuring charges
|
784
|
26,825
|
43,409
|
28,406
|
|||||||||||||||
Total operating expenses
|
243,276
|
234,746
|
864,352
|
786,708
|
|||||||||||||||
Operating income (loss)
|
(7,070
|
)
|
36,108
|
56,156
|
196,576
|
||||||||||||||
Other expense, net
|
(4,598
|
)
|
(3,740
|
)
|
(15,091
|
)
|
(10,464
|
)
|
|||||||||||
Income (loss) before income taxes
|
(11,668
|
)
|
32,368
|
41,065
|
186,112
|
||||||||||||||
Provision (benefit) for income taxes
|
(20,655
|
)
|
(6,387
|
)
|
(21,032
|
)
|
25,918
|
||||||||||||
Net income
|
$
|
8,987
|
$
|
38,755
|
$
|
62,097
|
$
|
160,194
|
|||||||||||
Earnings per share:
|
|||||||||||||||||||
Basic
|
$
|
0.08
|
$
|
0.33
|
$
|
0.54
|
$
|
1.36
|
|||||||||||
Weighted average shares outstanding
|
113,999
|
116,173
|
114,775
|
118,094
|
|||||||||||||||
Diluted
|
$
|
0.08
|
$
|
0.33
|
$
|
0.54
|
$
|
1.34
|
|||||||||||
Weighted average shares outstanding
|
115,025
|
118,275
|
116,012
|
119,984
|
|||||||||||||||
(1
|
)
|
The amounts in the tables above include stock-based compensation as follows:
|
|||||||||||||||||
Three Months Ended
|
Twelve Months Ended
|
||||||||||||||||||
September 30,
|
September 30,
|
September 30,
|
September 30,
|
||||||||||||||||
2015
|
2014
|
2015
|
2014
|
||||||||||||||||
Cost of L&S revenue
|
$
|
140
|
$
|
104
|
$
|
521
|
$
|
314
|
|||||||||||
Cost of support revenue
|
998
|
1,034
|
3,775
|
3,745
|
|||||||||||||||
Cost of service revenue
|
1,361
|
1,916
|
5,871
|
6,351
|
|||||||||||||||
Sales and marketing
|
2,840
|
2,399
|
12,223
|
10,982
|
|||||||||||||||
Research and development
|
2,608
|
3,052
|
11,623
|
10,119
|
|||||||||||||||
General and administrative
|
4,100
|
4,522
|
16,169
|
19,378
|
|||||||||||||||
Total stock-based compensation
|
$
|
12,047
|
$
|
13,027
|
$
|
50,182
|
$
|
50,889
|
|||||||||||
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,
|
|||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
GAAP revenue
|
$
|
312,568
|
$
|
366,708
|
$
|
1,255,242
|
$
|
1,356,967
|
||||||||
Fair value adjustment of acquired deferred L&S revenue
|
207
|
758
|
1,831
|
758
|
||||||||||||
Fair value adjustment of acquired deferred support revenue
|
43
|
348
|
898
|
348
|
||||||||||||
Fair value adjustment of acquired deferred service revenue
|
296
|
143
|
1,140
|
143
|
||||||||||||
Non-GAAP revenue
|
$
|
313,114
|
$
|
367,957
|
$
|
1,259,111
|
$
|
1,358,216
|
||||||||
GAAP gross margin
|
$
|
236,206
|
$
|
270,854
|
$
|
920,508
|
$
|
983,284
|
||||||||
Fair value adjustment of acquired deferred L&S revenue
|
207
|
758
|
1,831
|
758
|
||||||||||||
Fair value adjustment of acquired deferred support revenue
|
43
|
348
|
898
|
348
|
||||||||||||
Fair value adjustment of acquired deferred service revenue
|
296
|
143
|
1,140
|
143
|
||||||||||||
Fair value adjustment to deferred services cost
|
(134
|
)
|
(65
|
)
|
(526
|
)
|
(65
|
)
|
||||||||
Stock-based compensation
|
2,499
|
3,054
|
10,167
|
10,410
|
||||||||||||
Amortization of acquired intangible assets
|
||||||||||||||||
included in cost of L&S revenue
|
4,964
|
4,793
|
19,402
|
18,112
|
||||||||||||
Non-GAAP gross margin
|
$
|
244,081
|
$
|
279,885
|
$
|
953,420
|
$
|
1,012,990
|
||||||||
GAAP operating income (loss)
|
$
|
(7,070
|
)
|
$
|
36,108
|
$
|
56,156
|
$
|
196,576
|
|||||||
Fair value adjustment of acquired deferred L&S revenue
|
207
|
758
|
1,831
|
758
|
||||||||||||
Fair value adjustment of acquired deferred support revenue
|
43
|
348
|
898
|
348
|
||||||||||||
Fair value adjustment of acquired deferred service revenue
|
296
|
143
|
1,140
|
143
|
||||||||||||
Fair value adjustment to deferred services cost
|
(134
|
)
|
(65
|
)
|
(526
|
)
|
(65
|
)
|
||||||||
Fair value adjustment to deferred commission costs
|
-
|
(102
|
)
|
-
|
(102
|
)
|
||||||||||
Stock-based compensation
|
12,047
|
13,027
|
50,182
|
50,889
|
||||||||||||
Amortization of acquired intangible assets
|
||||||||||||||||
included in cost of L&S revenue
|
4,964
|
4,793
|
19,402
|
18,112
|
||||||||||||
Amortization of acquired intangible assets
|
8,438
|
8,355
|
36,129
|
32,127
|
||||||||||||
Acquisition-related charges included in
|
||||||||||||||||
general and administrative expenses
|
210
|
6,328
|
8,913
|
13,096
|
||||||||||||
US pension plan termination-related costs
|
67,779
|
-
|
73,171
|
-
|
||||||||||||
Pending legal settlement accrual
|
-
|
-
|
13,622
|
-
|
||||||||||||
Restructuring charges
|
784
|
26,825
|
43,409
|
28,406
|
||||||||||||
Non-GAAP operating income (2)
|
$
|
87,564
|
$
|
96,518
|
$
|
304,327
|
$
|
340,288
|
||||||||
GAAP net income
|
$
|
8,987
|
$
|
38,755
|
$
|
62,097
|
$
|
160,194
|
||||||||
Fair value adjustment of acquired deferred L&S revenue
|
207
|
758
|
1,831
|
758
|
||||||||||||
Fair value adjustment of acquired deferred support revenue
|
43
|
348
|
898
|
348
|
||||||||||||
Fair value adjustment of acquired deferred service revenue
|
296
|
143
|
1,140
|
143
|
||||||||||||
Fair value adjustment to deferred services cost
|
(134
|
)
|
(65
|
)
|
(526
|
)
|
(65
|
)
|
||||||||
Fair value adjustment to deferred commission costs
|
-
|
(102
|
)
|
-
|
(102
|
)
|
||||||||||
Stock-based compensation
|
12,047
|
13,027
|
50,182
|
50,889
|
||||||||||||
Amortization of acquired intangible assets
|
||||||||||||||||
included in cost of L&S revenue
|
4,964
|
4,793
|
19,402
|
18,112
|
||||||||||||
Amortization of acquired intangible assets
|
8,438
|
8,355
|
36,129
|
32,127
|
||||||||||||
Acquisition-related charges included in
|
||||||||||||||||
general and administrative expenses
|
210
|
6,328
|
8,913
|
13,096
|
||||||||||||
US pension plan termination-related costs
|
67,779
|
-
|
73,171
|
-
|
||||||||||||
Pending legal settlement accrual
|
-
|
-
|
13,622
|
-
|
||||||||||||
Restructuring charges
|
784
|
26,825
|
43,409
|
28,406
|
||||||||||||
Income tax adjustments (3)
|
(26,537
|
)
|
(20,440
|
)
|
(51,088
|
)
|
(43,528
|
)
|
||||||||
Non-GAAP net income
|
$
|
77,084
|
$
|
78,725
|
$
|
259,180
|
$
|
260,378
|
||||||||
PTC Inc. | |||||||||||||||||||
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED), Cont'd.
|
|||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||
Three Months Ended
|
Twelve Months Ended
|
||||||||||||||||||
September 30,
|
September 30,
|
September 30,
|
September 30,
|
||||||||||||||||
2015
|
2014
|
2015
|
2014
|
||||||||||||||||
GAAP diluted earnings per share
|
$
|
0.08
|
$
|
0.33
|
$
|
0.54
|
$
|
1.34
|
|||||||||||
Fair value of acquired deferred revenue
|
-
|
0.01
|
0.03
|
0.01
|
|||||||||||||||
Fair value adjustment to deferred services cost
|
-
|
-
|
-
|
-
|
|||||||||||||||
Stock-based compensation
|
0.10
|
0.11
|
0.43
|
0.42
|
|||||||||||||||
Amortization of acquired intangibles
|
0.12
|
0.11
|
0.48
|
0.42
|
|||||||||||||||
Acquisition-related charges
|
0.00
|
0.05
|
0.08
|
0.11
|
|||||||||||||||
US pension plan termination-related costs
|
0.59
|
-
|
0.63
|
-
|
|||||||||||||||
Pending legal settlement accrual
|
-
|
-
|
0.12
|
-
|
|||||||||||||||
Restructuring charges
|
0.01
|
0.23
|
0.37
|
0.24
|
|||||||||||||||
Income tax adjustments
|
(0.23
|
)
|
(0.17
|
)
|
(0.44
|
)
|
(0.36
|
)
|
|||||||||||
Non-GAAP diluted earnings per share
|
$
|
0.67
|
$
|
0.67
|
$
|
2.23
|
$
|
2.17
|
|||||||||||
(2
|
)
|
Operating margin impact of non-GAAP adjustments:
|
|||||||||||||||||
Three Months Ended
|
Twelve Months Ended
|
||||||||||||||||||
September 30,
|
September 30,
|
September 30,
|
September 30,
|
||||||||||||||||
2015
|
2014
|
2015
|
2014
|
||||||||||||||||
GAAP operating margin
|
-2.3
|
%
|
9.8
|
%
|
4.5
|
%
|
14.5
|
%
|
|||||||||||
Fair value of acquired deferred revenue
|
0.2
|
%
|
0.3
|
%
|
0.3
|
%
|
0.1
|
%
|
|||||||||||
Fair value adjustment to deferred services cost
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
|||||||||||
Stock-based compensation
|
3.9
|
%
|
3.6
|
%
|
4.0
|
%
|
3.8
|
%
|
|||||||||||
Amortization of acquired intangibles
|
4.3
|
%
|
3.6
|
%
|
4.4
|
%
|
3.7
|
%
|
|||||||||||
Acquisition-related charges
|
0.1
|
%
|
1.7
|
%
|
0.7
|
%
|
1.0
|
%
|
|||||||||||
US pension plan termination-related costs
|
21.7
|
%
|
0.0
|
%
|
5.8
|
%
|
0.0
|
%
|
|||||||||||
Pending legal settlement accrual
|
0.0
|
%
|
0.0
|
%
|
1.1
|
%
|
0.0
|
%
|
|||||||||||
Restructuring charges
|
0.3
|
%
|
7.3
|
%
|
3.5
|
%
|
2.1
|
%
|
|||||||||||
Non-GAAP operating margin
|
28.0
|
%
|
26.2
|
%
|
24.2
|
%
|
25.1
|
%
|
|||||||||||
(3
|
)
|
Income tax adjustments for the three and twelve months ended September 30, 2015 and 2014 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, and also include any identified tax items. In the fourth quarter of 2012, a valuation allowance was established against our U.S. net deferred tax assets. Similarly, in the fourth quarter of 2014, a valuation allowance was established against our foreign net deferred tax assets in a foreign jurisdiction. As the U.S. and the foreign jurisdiction are profitable on a non-GAAP basis, the 2015 and 2014 non-GAAP tax provisions are being calculated assuming there is no valuation allowance in these jurisdictions. The following identified tax item has been excluded from the non-GAAP tax results: Fiscal year 2014 includes a tax benefit of $18.1 million related to the release of a portion of the valuation allowance as a result of deferred tax liabilities established for the acquisitions of ThingWorx in Q2'14 of $8.9 million and Axeda in Q4'14 of $9.1 million; and a $1.9 million tax benefit in Q4'14 resulting from tax authority clearance in a foreign jurisdiction of an acquired company.
|
PTC Inc.
|
||||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||||||
(in thousands)
|
||||||||
September 30,
|
September 30,
|
|||||||
2015
|
2014
|
|||||||
ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
273,417
|
$
|
293,654
|
||||
Accounts receivable, net
|
197,275
|
235,688
|
||||||
Property and equipment, net
|
65,162
|
67,783
|
||||||
Goodwill and acquired intangible assets, net
|
1,360,342
|
1,349,400
|
||||||
Other assets
|
313,717
|
253,429
|
||||||
Total assets
|
$
|
2,209,913
|
$
|
2,199,954
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Deferred revenue
|
$
|
386,850
|
$
|
382,544
|
||||
Borrowings under credit facility
|
668,125
|
611,875
|
||||||
Other liabilities
|
280,227
|
351,646
|
||||||
Stockholders' equity
|
874,711
|
853,889
|
||||||
Total liabilities and stockholders' equity
|
$
|
2,209,913
|
$
|
2,199,954
|
||||
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,
|
|||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
Cash flows from operating activities:
|
||||||||||||||||
Net income
|
$
|
8,987
|
$
|
38,755
|
$
|
62,097
|
$
|
160,194
|
||||||||
Stock-based compensation
|
12,047
|
13,027
|
50,182
|
50,889
|
||||||||||||
Depreciation and amortization
|
20,978
|
20,008
|
84,433
|
77,307
|
||||||||||||
Accounts receivable
|
(15,183
|
)
|
(7,071
|
)
|
29,723
|
7,554
|
||||||||||
Accounts payable and accruals
|
(30,327
|
)
|
36,746
|
(40,356
|
)
|
8,538
|
||||||||||
Deferred revenue
|
(42,541
|
)
|
(30,341
|
)
|
8,852
|
24,998
|
||||||||||
Pension settlement loss
|
66,332
|
-
|
66,332
|
-
|
||||||||||||
Income taxes
|
(27,289
|
)
|
(15,357
|
)
|
(52,897
|
)
|
(812
|
)
|
||||||||
Excess tax benefits from stock-based awards
|
(95
|
)
|
(852
|
)
|
(24
|
)
|
(10,428
|
)
|
||||||||
Other
|
(5,469
|
)
|
(3,750
|
)
|
(28,439
|
)
|
(13,688
|
)
|
||||||||
Net cash (used) provided by operating activities (5)
|
(12,560
|
)
|
51,165
|
179,903
|
304,552
|
|||||||||||
Capital expenditures
|
(9,991
|
)
|
(8,554
|
)
|
(30,628
|
)
|
(25,275
|
)
|
||||||||
Acquisitions of businesses, net of cash acquired (6)
|
-
|
(212,006
|
)
|
(98,411
|
)
|
(323,525
|
)
|
|||||||||
Proceeds (payments) on debt, net
|
43,750
|
296,875
|
56,250
|
353,750
|
||||||||||||
Proceeds from issuance of common stock
|
3
|
76
|
41
|
877
|
||||||||||||
Payments of withholding taxes in connection with
|
||||||||||||||||
vesting of stock-based awards
|
(90
|
)
|
(108
|
)
|
(29,207
|
)
|
(26,857
|
)
|
||||||||
Repurchases of common stock
|
(14,978
|
)
|
(125,000
|
)
|
(64,940
|
)
|
(224,915
|
)
|
||||||||
Excess tax benefits from stock-based awards
|
95
|
852
|
24
|
10,428
|
||||||||||||
Other financing & investing activities
|
(4,323
|
)
|
(3,810
|
)
|
(15,323
|
)
|
(7,930
|
)
|
||||||||
Foreign exchange impact on cash
|
(3,549
|
)
|
(10,009
|
)
|
(17,946
|
)
|
(9,364
|
)
|
||||||||
Net change in cash and cash equivalents
|
(1,643
|
)
|
(10,519
|
)
|
(20,237
|
)
|
51,741
|
|||||||||
Cash and cash equivalents, beginning of period
|
275,060
|
304,173
|
293,654
|
241,913
|
||||||||||||
Cash and cash equivalents, end of period
|
$
|
273,417
|
$
|
293,654
|
$
|
273,417
|
$
|
293,654
|
||||||||
(5
|
)
|
The three and twelve months ended September 30, 2015 includes $26 million and $46 million of voluntary contribution funding payments to pension plans, respectively. The twelve months ended September 30, 2014 includes an $8 million voluntary contribution funding payment to a US pension plan. The three and twelve months ended September 30, 2015 include $6 million and $54 million in restructuring payments, respectively. The three and twelve months ended September 30, 2014 include $1 million and $21 million in restructuring payments, respectively.
|
|
(6
|
)
|
We acquired ColdLight on May 7, 2015 for $99 million (net of cash acquired). In fiscal year 2014, we completed the acquisitions of Axeda for $166 million (net of cash acquired) and Atego for $46 million (net of cash acquired) in Q4'14 and the acquisition of ThingWorx for $112 million (net of cash acquired) in Q2'14. During fiscal year 2014, we used cash flow from operations and borrowings under our credit facility to complete these acquisitions and to fund share repurchases.
|
In Millions
|
Q4
FY'15 |
YoY
|
YoY
CC |
Management Comments
|
Total Revenue
(GAAP) |
$312.6
|
(15%)
|
(6%)
|
·Total revenue was above the midpoint of our Q4 guidance range.
·Software revenue decreased 4% YoY CC, driven in large part by a higher mix of Subscription bookings; professional services revenue declined (27%) YoY and (19%) YoY CC driven in part by strong growth in service partner bookings. In addition, recurring Software revenue was negatively impacted by 6 fewer days in the quarter as compared to last year – or (7%).
|
Total Revenue
(Non-GAAP) |
$313.1
|
(15%)
|
(6%)
|
|
Software Revenue
(GAAP) |
$264.6
|
(12%)
|
(4%)
|
·Software revenue was above the midpoint of our Q4 guidance.
·L&S revenue was above the midpoint of Q4 guidance due to better than expected results in IoT and SLM. As compared to Q4'14, the constant currency revenue decline was due to a higher mix of Subscription bookings, offsetting higher overall L&S bookings, which grew 3% in constant currency. On a license mix-adjusted basis, non-GAAP L&S revenue was up 4% YoY CC and software revenue was up 3% YoY CC.
·L&S subscription bookings mix increased from 4% in Q4'14 to 20% in Q4'15.
·Support revenue was slightly above Q4 guidance due in part to a strong percentage of support renewals in the quarter. Support revenue decreased 8% YoY and was about flat YoY CC due to 6 fewer days in the quarter and a higher mix of Subscription.
|
Software Revenue
(Non-GAAP) |
$264.9
|
(12%)
|
(4%)
|
|
EPS
(GAAP) |
$0.08
|
(76%)
|
(107%)
|
·Non-GAAP EPS was above our guidance driven by lower operating expenses and a lower tax rate.
·On a constant currency, license mix-adjusted basis, non-GAAP EPS growth would have been 45% YoY.
|
EPS
(Non-GAAP) |
$0.67
|
1%
|
20%
|
In Millions
|
FY'15
|
YoY
|
YoY
CC |
Management Comments
|
Total Revenue
(GAAP) |
$1,255.2
|
(7%)
|
0%
|
·Software revenue increased 3% YoY CC and professional services revenue declined (11%) YoY CC, reflecting strong growth in service partner bookings.
|
Total Revenue
(Non-GAAP) |
$1,259.1
|
(7%)
|
0%
|
|
Software Revenue
(GAAP) |
$1,029.5
|
(5%)
|
3%
|
·L&S revenue declined (4%) YoY CC and (3%) YoY CC on a non-GAAP basis. We had fewer large deals in our Core business stemming from a weaker than expected macroeconomic environment impacting spending among discrete manufacturing customers and a tough revenue compare in CAD and ePLM, which had increased in the double digits in FY'14.
·A higher mix of Subscription bookings in FY'15 also contributed to the decline in non-GAAP L&S revenue. On a license mix-adjusted basis, non-GAAP L&S revenue was flat YoY CC and software revenue was up 5% YoY CC.
·L&S subscription bookings mix increased from 8% in FY'14 to 17% in FY'15.
·Support revenue decreased (1%) YoY and increased 7% YoY CC due to strong L&S bookings in FY'14 and pricing actions at the beginning of FY'15.
|
Software Revenue
(Non-GAAP) |
$1,032.3
|
(4%)
|
3%
|
|
EPS
(GAAP) |
$0.54
|
(60%)
|
(50%)
|
·FY'15 EPS declined due to the impact of foreign currency depreciation vs. the US dollar, a higher mix of subscription bookings, $73 million of pension expenses recorded in connection with terminating a U.S. pension plan and a $14 million legal settlement accrual.
·FY'15 non-GAAP EPS increased 21% YoY CC due to lower expenses, including lower performance-based variable compensation and a lower tax rate, offsetting revenue declines primarily driven by a stronger US dollar, a higher mix of Subscription bookings.
|
EPS
(Non-GAAP) |
$2.23
|
3%
|
21%
|
In Millions
|
Q4
FY'15 |
YoY
|
YoY
CC |
Management Comments
|
CAD Software
|
$123.3
|
(19%)
|
(10%)
|
·CAD support revenue decreased (11%) YoY and (1%) YoY CC, negatively impacted by 6 fewer days in the quarter.
·CAD L&S revenue decreased (34%) YoY and (28%) YoY CC due primarily to lower CAD L&S bookings, which decreased (22%) YoY CC driven by fewer large deals and a weaker macroeconomic environment impacting spending among discrete manufacturing customers. Subscription mix did not significantly impact CAD L&S revenue.
|
ePLM Software
|
$99.2
|
(14%)
|
(6%)
|
·ePLM support revenue decreased (6%) YoY and increased 2% YoY CC, negatively impacted by 6 fewer days in the quarter.
·ePLM L&S revenue declined (24%) YoY and (15%) YoY CC, with high single digit YoY CC growth in our ALM business offset by a decline in our PLM business driven by fewer large deals and a higher mix of subscription bookings.
·ePLM L&S bookings increased 4% YoY CC driven by strong double digit growth in ALM bookings offset by a mid-single digit decline in PLM bookings.
|
IoT Software
(GAAP) |
$11.0
|
175%
|
181%
|
·IoT support revenue and L&S revenue both increased over 100% YoY driven by strong growth in our ThingWorx® platform and the acquisition of Axeda in August 2014, despite 6 fewer days in the quarter.
·IoT L&S bookings increased 208% YoY CC. During Q4'15, we added 108 new IoT logos.
·IoT non-GAAP L&S revenue was 10% of total L&S revenue and IoT L&S bookings were 10% of total L&S bookings.
|
IoT Software
(Non-GAAP) |
$11.3
|
121%
|
125%
|
|
SLM Software
|
$31.2
|
7%
|
15%
|
·SLM support revenue decreased (8%) YoY and (3%) YoY CC, negatively impacted by 6 fewer days in the quarter.
·SLM L&S revenue increased 34% YoY and 47% YoY CC.
·SLM L&S bookings increased 59% YoY CC, benefitting from our pipeline rebuilding efforts during FY'14 and early FY'15.
|
In Millions
|
FY'15
|
YoY
|
YoY
CC |
Management Comments
|
CAD Software
|
$492.7
|
(12%)
|
(4%)
|
·CAD support revenue decreased (5%) YoY and increased 3% YoY CC.
·CAD L&S revenue decreased (26%) YoY and (19%) YoY CC primarily due to lower L&S bookings and a modestly higher mix of L&S subscription bookings in FY'15.
·CAD L&S bookings decreased (18%) YoY CC driven by fewer large deals and a weaker macroeconomic environment impacting spending among discrete manufacturing customers, as well as a challenging comparison versus FY'14 when CAD L&S bookings increased 15% YoY CC.
|
ePLM Software
|
$373.4
|
(7%)
|
0%
|
·ePLM support revenue increased 4% YoY and 10% YoY CC.
·ePLM L&S revenue decreased (22%) YoY and (14%) YoY CC with growth in ALM and cloud services offset by a decline in our PLM business.
·ePLM L&S bookings decreased (15%) YoY CC with double digit growth in ALM L&S bookings offset by a decline in PLM L&S bookings. During FY'15 we saw fewer ePLM large deals and a weaker macroeconomic environment impact spending among discrete manufacturing customers, as well as a challenging comparison versus FY'14 when ePLM L&S bookings increased 16% YoY CC.
|
IoT Software
(GAAP) |
$49.2
|
923%
|
934%
|
·IoT support revenue and L&S revenue both increased over 800% YoY, driven by strong growth in our ThingWorx® platform and the acquisition of Axeda in August 2014.
·IoT L&S bookings increased 442% YoY CC for FY'15, driven by strong growth in new ThingWorx® customer bookings and follow-on business with existing IoT customers, as well as the acquisition of Axeda. On a pro forma basis, if we include Axeda's pre-acquisition bookings during FY'14, then FY'15 bookings would have increased more than 150%. During FY'15, we added 290 new IoT logos.
·IoT non-GAAP L&S revenue was 13% of total L&S revenue and IoT L&S bookings were 12% of total L&S bookings.
|
IoT Software
(Non-GAAP) |
$52.0
|
778%
|
787%
|
|
SLM Software
|
$114.2
|
0%
|
6%
|
·SLM support revenue was flat YoY and increased 5% YoY CC.
·SLM L&S revenue increased 1% YoY and 7% YoY CC with growth in our service information, service parts management, and SLM cloud services business.
·SLM L&S bookings increased 7% YoY CC for the full year and 33% YoY CC in the second half of FY'15, driven by our pipeline rebuilding efforts during FY'14 and early FY'15.
|
In Millions
|
Q4 FY'15
|
YoY
|
YoY
CC |
Management Comments
|
Americas Software
(GAAP) |
$109.4
|
(13%)
|
(12%)
|
·Americas support revenue decreased (1%) YoY, negatively impacted by 6 fewer days in the quarter. On a constant currency basis, a higher mix of L&S subscription bookings impacted revenue by 140 basis points.
·Americas L&S revenue decreased (31%) YoY with strong growth in IoT offset by declines in SLM, CAD and ePLM. The decrease was due to lower L&S bookings and an increased mix of subscription bookings. On a license mix-adjusted basis, L&S revenue decreased (13%) YoY CC.
·Americas L&S bookings decreased (16%) YoY CC with rapid growth in IoT offset by declines in CAD, ePLM, and SLM bookings due in part to a challenging comparison when we had one mega deal in the region and a challenging macroeconomic environment.
|
Americas Software
(Non-GAAP) |
$109.6
|
(13%)
|
(13%)
|
|
Europe
Software |
$99.9
|
(15%)
|
1%
|
·Europe support revenue decreased (14%) YoY and increased 2% YoY CC, despite the negative impact of 6 fewer days in the quarter.
·Europe L&S revenue decreased (16%) YoY and was flat on a YoY CC basis with strong growth in IoT, SLM, and ePLM offset by a decline in CAD. On a license mix-adjusted basis, L&S revenue increased 19% YoY CC.
·Europe L&S bookings increased 17% YoY CC with strong growth in ePLM, SLM, and IoT partially offset by a decline in CAD and despite a challenging comparison with Q4 FY'14 when we had one mega deal in the region.
|
Japan
Software (GAAP) |
$23.4
|
(4%)
|
16%
|
·Japan support revenue decreased (17%) YoY and was flat on a YoY CC basis, despite the negative impact of 6 fewer days in the quarter.
·Japan L&S revenue increased 28% YoY and 55% YoY CC with growth in IoT, SLM, and ePLM offset by a decline in CAD.
·Japan L&S bookings increased 54% YoY CC with strong growth in ePLM, SLM, and IoT partially offset by a decline in CAD.
|
Japan Software (Non-GAAP)
|
$23.5
|
(4%)
|
16%
|
|
Pacific Rim
Software |
$31.9
|
(6%)
|
(2%)
|
·Pacific Rim support revenue decreased (5%) YoY and was flat on a YoY CC basis, negatively impacted by 6 fewer days in the quarter.
·Pacific Rim L&S revenue declined (7%) YoY and (3%) YoY CC with growth in IoT and SLM offset by declines in ePLM and CAD. On a license mix-adjusted basis, L&S revenue was flat YoY CC.
·Pacific Rim L&S bookings were flat YoY CC with strong growth in IoT and SLM, and modest growth in CAD, offset by a decline in ePLM.
|
In Millions
|
FY'15
|
YoY
|
YoY
CC |
Management Comments
|
Americas Software
(GAAP) |
$434.7
|
0%
|
0%
|
·Americas support revenue increased 6% YoY and 7% YoY CC
·Americas L&S revenue decreased (12%) YoY and (11%) YoY on a non-GAAP basis with rapid growth in IoT and solid growth in SLM offset by declines in CAD and ePLM. On a license mix-adjusted basis, L&S revenue increased 2% YoY.
·Americas L&S bookings decreased (8%) YoY CC with strong growth in IoT and SLM bookings offset by declines in CAD and ePLM, driven by fewer large deals and a weaker macroeconomic environment impacting spending among discrete manufacturing customers.
|
Americas Software
(Non-GAAP) |
$437.0
|
0%
|
1%
|
|
Europe Software (GAAP)
|
$377.0
|
(10%)
|
4%
|
·Europe support revenue decreased (7%) YoY and increased 7% YoY CC.
·Europe L&S revenue decreased (15%) YoY and (1%) YoY CC with strong growth in IoT and ePLM on a YoY CC basis and modest growth in SLM on a YoY CC basis offset by a decline in CAD..
·Europe L&S bookings decreased (9%) YoY CC with strong growth in IoT offset by declines in CAD, ePLM, and SLM driven by the impact of fewer large deals versus a challenging FY'14 comparison.
|
Europe Software (Non-GAAP)
|
$377.3
|
(10%)
|
4%
|
|
Japan
Software (GAAP) |
$99.0
|
(6%)
|
9%
|
·Japan support revenue decreased (10%) YoY and increased 5% on a YoY CC basis.
·Japan L&S revenue was flat YoY and up 16% YoY CC, marking six consecutive years of constant currency L&S revenue growth in Japan. We experienced strong YoY CC L&S revenue growth in IoT, SLM and ePLM offset by a decline in CAD. On a license mix-adjusted basis, L&S revenue increased 19% YoY CC.
·Japan L&S bookings increased 17% YoY CC with rapid growth in IoT, ePLM and SLM partially offset by a decline in CAD.
|
Japan Software (Non-GAAP)
|
$99.1
|
(6%)
|
9%
|
|
Pacific Rim
Software |
$118.8
|
0%
|
2%
|
·Pacific Rim support revenue increased 5% YoY and 8% YoY CC.
·Pacific Rim L&S revenue declined (5%) YoY and (3%) YoY CC with strong growth in IoT and modest growth in CAD offset by declines in ePLM and SLM. On a license mix-adjusted basis, L&S revenue decreased (1%) YoY CC.
·Pacific Rim L&S bookings declined (1%) YoY CC with rapid growth in IoT and modest growth in CAD offset by declines in ePLM and SLM.
|
In Millions
|
Q4'15
GAAP |
Q4'15
Non-GAAP |
Management Comments
|
Professional Services
Gross Margin |
10.5%
|
13.6%
|
·Professional services gross margin decreased 330 basis points sequentially on a GAAP basis and decreased 290 basis points on a non-GAAP basis, primarily due to a revenue deferral associated with a cash-basis revenue recognition customer where the related costs of the project were recorded in the quarter.
|
Sales and
Marketing
|
$82.7
|
$79.9
|
·S&M expense was about flat YoY as a percentage of revenue.
|
S&M % of
Revenue
|
26.5%
|
25.5%
|
|
Research and Development
|
$52.2
|
$49.6
|
·R&D expense as a percentage of revenue was about flat YoY with higher spending related to our IoT, SLM, and ALM businesses, partially offset by restructuring actions taken at the end of Q4 FY'14 and Q2 FY'15.
|
R&D % of
Revenue
|
16.7%
|
15.8%
|
|
General and Administrative
|
$99.2
|
$27.1
|
·G&A expense as a percentage of revenue increased to 31.7% from 11.8% in Q4 FY'14 primarily due to settlement losses related to the termination of our U.S. pension plan.
·Non-GAAP G&A was about flat YoY as a percentage of revenue.
|
G&A % of
Revenue
|
31.7%
|
8.7%
|
|
Operating Profit
|
($7.1)
|
$87.6
|
·Settlement losses related to the termination of our U.S. pension plan of $66.3 million were recognized in Q4, but not included in guidance as the amount of the losses varied based on the timing of the settlement and the amount of projected benefit obligations. This caused GAAP operating margin to be below our guidance.
·Non-GAAP operating margin was above our guidance range, driven by higher gross margin and lower operating expense.
·When viewed on a license mix-adjusted CC basis, non-GAAP operating margin would have been approximately 34% in Q4 FY'15.
|
Operating Margin
|
(2.3%)
|
28.0%
|
|
Income Taxes
|
($20.7)
|
$5.9
|
·The GAAP income tax rate reflects an $18.7 million valuation allowance release associated with the termination of a U.S. pension plan.
·The non-GAAP tax rate was below our 15% guidance due to the geographic mix of pre-tax income.
|
Tax Rate
|
177%
|
7.1%
|
In Millions
|
FY'15
GAAP |
FY'15
Non-GAAP |
Management Comments
|
Professional Services
Gross Margin |
12.0%
|
14.8%
|
·For FY'15 non-GAAP professional services gross margin approximated our guidance of 15%.
|
Sales and Marketing
|
$338.8
|
$326.6
|
·Our goal is to improve sales efficiency. On a trailing 12-month basis, we generated $1.06 in L&S bookings for every $1.00 of non-GAAP sales and marketing expenses, down (7%) YoY, attributable to lower than expected bookings, which we believe was partially due to macroeconomic conditions.
·In addition, during FY'15 we further segmented our sales force with approximately 15% of our direct sellers focused exclusively on adding new IoT customers, which by design is initially less productive.
·S&M expense as a percentage of revenue increased 70 basis points YoY and 40 basis points on a non-GAAP basis, driven by higher spending related to our IoT business and the acquisitions of Axeda and Atego, partially offset by restructuring actions taken at the end of Q4 FY'14 and Q2 FY'15.
|
S&M % of Revenue
|
27.0%
|
25.9%
|
|
Research and Development
|
$227.5
|
$215.9
|
·As part of our portfolio management strategy, we have increased development spending on IoT, our highest growth opportunity.
·R&D expense as a percentage of revenue increased 140 basis points YoY and 120 basis points on a non-GAAP basis driven by higher spending related to our IoT, SLM, and ALM businesses and due to the acquisitions of Axeda, Atego, and ColdLight, partially offset by restructuring actions taken at the end of Q4 FY'14 and Q2 FY'15.
|
R&D % of Revenue
|
18.1%
|
17.1%
|
|
General and Administrative
|
$218.5
|
$106.6
|
·G&A expense as a percentage of revenue increased 690 basis points YoY due to expenses related to the termination of our U.S. pension plan of $73 million and by a $14 million legal settlement accrual.
·On a non-GAAP basis G&A expense as a percentage of revenue increased 40 basis points driven by the acquisition of Axeda and Atego, partially offset by restructuring actions taken at the end of Q4 FY'14 and Q2 FY'15.
|
G&A % of Revenue
|
17.4%
|
8.5%
|
|
Operating Profit
|
$56.2
|
$304.3
|
·Operating margin declined due to lower revenue from a stronger dollar and a higher mix of Subscription bookings.
·When viewed on a license mix-adjusted CC basis, non-GAAP operating margin would have been approximately 29% in FY'15 vs. 26% in FY'14.
|
Operating Margin
|
4.5%
|
24.2%
|
|
Income Taxes
|
($21.0)
|
$30.1
|
·The GAAP income tax rate reflects lower GAAP pretax income, driven in part by lower revenue, a $14 million legal settlement accrual, and a $19 million valuation allowance release associated with the termination of a U.S. pension plan, as well as discrete items in the year and geographic mix of pretax income.
·The non-GAAP tax rate was below our 15% guidance due to discrete items in the year and the geographic mix of earnings.
|
Tax Rate
|
(51.2%)
|
10.4%
|
·
|
In Q4'15, subscription solutions bookings represented 20% of L&S bookings, above our guidance assumption of 14% and far exceeded the 4% in Q4'14. For FY'15 subscription solutions bookings represented 17% of L&S bookings, more than double the 8% in FY'14, and above our guidance assumption of 15%.
|
·
|
For both Q4'15 and the full year, approximately 59% of revenue came from recurring revenue streams (subscription solutions and support), up from 53% in the year ago periods.
|
·
|
While we experienced substantial YoY and QoQ growth in IoT revenue and bookings, at this stage, our primary goal is to win new accounts or new logos, and then expand within these accounts. We added 108 new IoT customers in Q4 FY'15, bringing our total for FY'15 to 290, significantly exceeding our target of 200 new IoT customer additions in FY'15.
|
·
|
We had 21 large deals (transactions with greater than $1 million L&S bookings from a customer during the quarter) in Q4'15, up from 18 in Q4'14. Q4'15 large deals were consistent with our historic average of 30% to 50% of L&S bookings, but total bookings from large deals was down from Q4'14. We had no mega deals (transactions with greater than $5 million of L&S bookings from a single customer) in Q4'15, down from two mega deals in Q4'14. For FY'15 we had 57 large deals, down from 70 in FY'14.
|
·
|
We spent approximately $15 million to repurchase 434,000 shares in Q4 FY'15 at an average price of $34.49. In FY'15, share repurchases exceeded our commitment to return 40% of free cash flow to shareholders.
|
·
|
We ended the quarter with 329 quota-carrying sales reps, up from 327 in Q3 FY'15.
|
·
|
In keeping with our strategy to grow our professional services partner ecosystem, Q4 FY'15 service partner bookings grew by 23% YoY and 55% for the full-year FY'15, with strong bookings growth among our large system integrator partners.
|
·
|
Current borrowings under our credit facility total $668 million. Under our current leverage covenant, we are limited to 3.0 times adjusted EBITDA which, as of September 30, 2015, would limit additional revolving credit borrowings to $150 million. Further, if our leverage covenant ratio exceeds 2.75 times adjusted EBITDA, our stock repurchases are limited to $50 million in a year.
|
·
|
License and Subscription (L&S) Bookings on a perpetual-equivalent basis
|
·
|
Subscription annualized contract value, or ACV
|
·
|
Subscription bookings mix
|
·
|
Annualized recurring revenue, or ARR, which will include Subscription and Support
|
·
|
Within our Software revenue disclosures, we will separately disclose Perpetual, Subscription and Support revenue
|
·
|
Total License and Subscription Bookings
|
·
|
Subscription ACV
|
·
|
Subscription bookings mix
|
·
|
Operating expense
|
·
|
Annual free cash flow
|
·
|
In conjunction with our new organizational structure and as further evidence of PTC's commitment to long-term margin expansion, the company is re-aligning its workforce to achieve operational efficiencies. The company expects these actions to reduce annual operating expenses by approximately $17 million year-over-year, with the full impact achieved as we exit the second fiscal quarter of fiscal 2016. The expected reduction in operating expense is net of a significant increase in performance-based variable compensation relative to FY'15, should we achieve the performance targets, and increased operating expenses associated with a full year of the ColdLight acquisition, and if completed, the Vuforia acquisition.
|
·
|
We expect that the reorganization and re-alignment could adversely impact our performance in FY'16, especially early in the year. This impact is reflected more acutely in our Q1'16 bookings guidance with the linearity at the lower-end of our historical average.
|
·
|
Current indicators suggest the global manufacturing economy is weaker than what we experienced entering FY'15, with foreign currency depreciation and other acute macro factors potentially weighing on our multinational customers in the Americas and certain weakening economic indicators for manufacturers in Europe, Japan, and China.
|
·
|
We expect large deals, which historically represent 30% to 50% of L&S bookings, will remain at the lower end of that range. This is based on the effect of a more challenging global manufacturing economy on large deal volumes in our CAD and ePLM businesses. We have also factored in the potential for smaller average deal sizes as the subscription model accelerates. Unlike the traditional big-deal enterprise perpetual model, subscription models generally follow more of a "land and expand" dynamic with more frequent, but smaller transactions.
|
·
|
We expect that approximately 25% of our license and subscription bookings will come in as subscription bookings during FY'16, up from 17% in FY'15 and 8% in FY'14. Having just recently launched the second phase of our subscription program, we are expecting the subscription bookings mix to be approximately 18% in Q1, then accelerate through the year as our sales organization becomes more accustomed to positioning the new licensing model. We expect to exit the year with subscription bookings higher than the 25% average for the full year.
|
·
|
Our guidance is based on current exchange rates.
|
In Millions
|
Q1
FY'16 Low |
Q1
FY'16 High |
FY'16
Low |
FY'16
High |
Management Comments
|
Subscription ACV(1)
|
$6
|
$6
|
$40
|
$45
|
·FY'16 subscription ACV guidance represents approximately 40% growth YoY.
|
License and Subscription Bookings(1)
|
$62
|
$70
|
$320
|
$350
|
·Our bookings guidance reflects caution about the macroeconomic climate, organization changes that we are undertaking, and the potential for smaller average deal sizes.
|
Subscription % of
Bookings(1)
|
18%
|
18%
|
25%
|
25%
|
·We anticipate a higher mix of subscription bookings in FY'16 driven by new changes to our subscription pricing, packaging, and sales incentives.
·Our mix of subscription bookings in Q1'16 is likely to come in below the full year number based on a higher number of perpetual deals in our current sales funnel.
|
Subscription Revenue
|
$20
|
$20
|
$90
|
$90
|
·FY'16 subscription revenue guidance represents approximately 35% growth YoY.
|
Support Revenue
|
$170
|
$170
|
$700
|
$700
|
·Guidance reflects the impact of a higher % of subscription bookings, which lowers the perpetual revenue and associated Support revenue.
|
Perpetual License
Revenue
|
$52
|
$57
|
$240
|
$260
|
·FY'16 guidance reflects a (12%) decrease YoY at the mid-point, reflecting a higher anticipated mix of subscription bookings.
|
Software Revenue
|
$242
|
$247
|
$1,000
|
$1,020
|
|
Professional Services
Revenue
|
$48
|
$48
|
$200
|
$200
|
·We expect further transition of certain customer engagements to our partner ecosystem and ongoing development of solutions that require less professional services to deploy.
|
Total Revenue
|
$290
|
$295
|
$1,200
|
$1,220
|
In Millions
|
Q1
FY'16 Low |
Q1
FY'16 High |
FY'16
Low |
FY'16
High |
Management Comments
|
Operating Expense
(GAAP)
Operating Expense
(Non-GAAP)
|
$188
$158
|
$190
$160
|
$714
$627
|
$729
$642
|
·Our non-GAAP operating expense guidance for FY'16 reflects a (2%) decrease YoY due to the impact of our Q1'16 re-alignment actions.
·The expected decrease in operating expense is net of a significant increase in performance-based variable compensation relative to FY'15, should we achieve the performance targets, and increased operating expenses associated with the full year ColdLight acquisition and, if completed, the Vuforia acquisition.
|
Operating Margin
(GAAP) |
9%
|
10%
|
13%
|
14%
|
·Our non-GAAP operating margin guidance for FY'16 is approximately 23% vs. 24% in FY'15 due to the anticipated increase in subscription bookings mix.
·If adjusted for the expected increase in subscription mix, non-GAAP operating margin would have increased about 100 basis points.
·We are targeting a 16% non-GAAP professional services gross margin in FY'16.
|
Operating Margin
(Non-GAAP) |
22%
|
22%
|
23%
|
23%
|
|
Tax Rate
(GAAP) |
20%
|
20%
|
20%
|
20%
|
|
Tax Rate
(Non-GAAP) |
20%
|
15%
|
20%
|
15%
|
|
Shares Outstanding
|
116
|
116
|
116
|
116
|
·We expect share count to be 116 million, with planned share repurchases weighted to the latter part of the year.
|
EPS
(GAAP) |
$0.15
|
$0.17
|
$0.95
|
$1.05
|
|
EPS
(Non-GAAP) |
$0.40
|
$0.45
|
$1.80
|
$1.90
|
|
Free Cash Flow
|
$215
|
$225
|
·Our FY'16 free cash flow guidance excludes the expected $40 million to $50 million restructuring charges associated with our re-alignment actions, and the $13.6 current amount of our legal settlement reserve that we may pay to the Securities and Exchange Commission and the Department of Justice to resolve our previously announced investigation in China.
|
In Millions
|
Q1
FY'16 |
FY'16
|
Effect of acquisition accounting on fair value of acquired deferred revenue
|
-
|
$ 1
|
Stock-based compensation expense
|
24
|
64
|
Intangible asset amortization expense
|
13
|
50
|
Acquisition-related charges
|
1
|
1
|
Total Estimated GAAP adjustments
|
$ 38
|
$ 116
|
·
|
We believe that the initiatives we are driving in our Solutions Group and strong position we have established in our Technology Platform Group together can drive ~10% bookings growth by FY'18. This is predicated on achieving growth in our Solutions Group in line with market growth rates of ~6% by FY18 and growth in our Technology Platform Group in line with market growth rates of ~40%.
|
·
|
Exiting FY'18 we expect to see continued bookings growth, which in turn, we expect to drive ~10% total revenue growth by FY'21, when we expect our financial results will have normalized from the subscription transition.
|
·
|
We expect our subscription bookings mix will accelerate throughout FY'16, averaging 25% for the full-year, then continue to grow through FY'18, when we expect to achieve a steady-state mix of 70%.
|
·
|
Based on these high-level assumptions, we expect revenue, operating margin and free cash flow to trough in FY'18, begin to recover in FY'19 and normalize in FY'21, at which point we expect to achieve non-GAAP operating margins in the low 30% range.
|
·
|
Reporting metrics and non-GAAP definitions – Management believes certain non-GAAP financial measures provide additional meaningful financial information that should be considered when assessing our ongoing performance. These measures should be considered in addition to, not as a substitute for, the reported GAAP results.
|
·
|
Software licensing model – A majority of our software sales to date have been perpetual licenses, where customers own the software license. Typically our customers choose to pay for ongoing support, which includes the right to software upgrades and technical support, and attach rates on support are in the high 90% range with retention rates also in the 90% range. A small but growing percentage of our business consists of ratably recognized subscriptions. Under a subscription, customers pay a periodic fee for the continuing right to use our software, including access to technical support. They may also elect to use our cloud services and have us manage the application. We began offering subscription pricing as an option for most PTC products in Q1 FY'15. We believe this additional purchase option will prove attractive to customers over time as it: (1) increases customer flexibility and opportunity to change their mix of licenses; (2) lowers the initial purchase commitment; and (3) allows customers to use operating rather than capital budgets. Over a three to five year period we believe the net present value (NPV) of a subscription is likely to exceed that of a perpetual license, assuming similar seat counts. However, initial revenue, operating margin, and EPS will be lower as revenue is recognized ratably in a subscription, rather than up front.
|
·
|
Bookings Metric – Given the difference in revenue recognition between the sale of a perpetual software license (revenue is recognized at the time of sale) and a subscription (revenue is deferred and recognized ratably over the subscription term), we use bookings for internal planning, forecasting and reporting of new license and cloud services transactions. In order to normalize between perpetual and subscription transactions, we define bookings as either the annualized contract value (ACV) of a new subscription multiplied by a conversion factor of 2 or the perpetual license revenue recognized. We arrived at the conversion factor of 2 by considering a number of variables including pricing, support, length of term, and renewal rates. We define ACV as the total value of a new subscription solutions booking divided by the term of the contract (in days) multiplied by 365, unless the term is less than one year, in which case the contract value equals the ACV. Because subscription solutions bookings is a metric we use to approximate the value of subscription solution sales if sold as perpetual licenses, it does not represent the actual revenue that will be recognized with respect to subscription solution sales or that would be recognized if the sales were perpetual licenses. When calculating L&S bookings for a period, we add the value of the converted subscription solutions booking to our perpetual license revenue recognized for the period.
|
·
|
License Mix-Adjusted Metrics ‑ assume that all new software and cloud services bookings since the start of FY'14 were perpetual license sales that included support in subsequent periods. The license mix-adjusted amount is calculated by converting the ACV (as defined above) of a new subscription solutions booking in the period to an assumed perpetual license equivalent by multiplying the ACV by a conversion factor of 2 (as defined above), and adding that amount to the perpetual license revenue amounts recognized in that period. Support calculated at 20% of the annual value of the converted amount is added to support revenue in future periods, beginning the quarter after the converted booking is assumed to be recognized. The assumed support revenue is recognized ratably over a 12-month period and is assumed to renew in subsequent years.
|
·
|
Free Cash Flow – is cash provided by operating activities less capital expenditures, and excludes the impact of restructuring charges we may incur and other significant unpredicted discrete items. Management believes this is an important metric in evaluating our financial performance as it enables investors to assess our ability to generate cash without incurring additional external financings.
|
·
|
Non-GAAP Revenue – excludes the fair value adjustment for acquired deferred revenue. We consider the use of non-GAAP revenue helpful in understanding the ongoing operating performance of our business. Furthermore, we disclose revenue trends across three lines of business: (1) license & subscription solutions; (2) support; and (3) professional services. In Q1'15, we began including cloud services revenue, which was formerly reported in services, within license & subscription solutions. We also reclassified a modest amount of FY'14 support revenue as subscription (less than $4 million).
|
·
|
Foreign Currency Impacts on our Business – We have a global business, with Europe and Asia historically representing approximately 60% of our revenue, and fluctuation in foreign currency exchange rates can significantly impact our results. We do not forecast currency movements; rather we provide detailed constant currency commentary. Based on current revenue and expense levels, a $0.10 move on the USD|EUR exchange rate will impact annualized
|
|
revenue by approximately $35 to $40 million and EPS by approximately $0.11 to $0.15. Given recent fluctuation in the YEN|USD exchange rate, we also note that a 10 YEN move versus the USD will impact annualized revenue by approximately $13 to $17 million and EPS by approximately $0.04 to $0.06.
|
·
|
Constant Currency Change Measure (YoY CC) – Year-over-year changes in revenue on a constant currency basis compare actual reported results converted into U.S. dollars based on the corresponding prior year's foreign currency exchange rates to reported results for the comparable prior year period.
|