UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from_ to_
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
(Address of principal executive offices, including zip code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
There were
PTC Inc.
INDEX TO FORM 10-Q
For the Quarter Ended December 31, 2021
PART I—FINANCIAL INFORMATION
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ITEM 1. |
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
PTC Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
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December 31, 2021 |
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September 30, 2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Goodwill |
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Acquired intangible assets, net |
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Deferred tax assets |
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Operating right-of-use lease assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Accrued compensation and benefits |
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Accrued income taxes |
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Deferred revenue |
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Short-term lease obligations |
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Total current liabilities |
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Long-term debt |
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Deferred tax liabilities |
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Long-term deferred revenue |
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Long-term lease obligations |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies (Note 10) |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
1
PTC Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
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Three months ended |
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December 31, 2021 |
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December 31, 2020 |
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Revenue: |
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License |
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$ |
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$ |
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Support and cloud services |
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Total software revenue |
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Professional services |
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Total revenue |
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Cost of revenue: |
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Cost of license revenue |
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Cost of support and cloud services revenue |
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Total cost of software revenue |
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Cost of professional services revenue |
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Total cost of revenue |
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Gross margin |
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Operating expenses: |
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Sales and marketing |
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Research and development |
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General and administrative |
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Amortization of acquired intangible assets |
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Restructuring and other charges, net |
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Total operating expenses |
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Operating income |
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Interest expense |
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Other income (expense), net |
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Income before income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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Earnings per share—Basic |
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$ |
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$ |
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Earnings per share—Diluted |
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$ |
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$ |
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Weighted-average shares outstanding—Basic |
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Weighted-average shares outstanding—Diluted |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
2
PTC Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
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Three months ended |
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December 31, 2021 |
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December 31, 2020 |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss), net of tax: |
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Hedge gain (loss) arising during the period, net of tax of $ |
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Foreign currency translation adjustment, net of tax of $ |
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Unrealized gain (loss) on marketable securities, net of tax of $ |
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Amortization of net actuarial pension loss included in net income, net of tax of $ |
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Change in unamortized pension gain (loss) during the period related to changes in foreign currency |
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Other comprehensive income (loss) |
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( |
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Comprehensive income |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
3
PTC Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Three months ended |
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December 31, 2021 |
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December 31, 2020 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization of right-of-use lease assets |
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Stock-based compensation |
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Gain on investment |
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Other non-cash items, net |
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( |
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( |
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Changes in operating assets and liabilities, excluding the effects of acquisitions: |
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Accounts receivable |
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Accounts payable and accrued expenses |
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Accrued compensation and benefits |
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( |
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Deferred revenue |
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( |
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( |
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Accrued income taxes |
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( |
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Other current assets and prepaid expenses |
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( |
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Operating lease liabilities |
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( |
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( |
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Other noncurrent assets and liabilities |
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( |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Additions to property and equipment |
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( |
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( |
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Purchases of short- and long-term marketable securities |
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( |
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Proceeds from sales of short- and long-term marketable securities |
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Proceeds from maturities of short- and long-term marketable securities |
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Purchases of investments |
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( |
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Purchase of intangible assets |
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( |
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( |
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Settlement of net investment hedges |
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( |
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Net cash provided by investing activities |
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Cash flows from financing activities: |
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Repayments of borrowings under credit facility |
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( |
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Repurchases of common stock |
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( |
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Payments of withholding taxes in connection with stock-based awards |
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( |
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( |
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Payments of principal for financing leases |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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( |
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Net change in cash, cash equivalents, and restricted cash |
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( |
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Cash, cash equivalents, and restricted cash, beginning of period |
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Cash, cash equivalents, and restricted cash, end of period |
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$ |
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$ |
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Supplemental disclosure of non-cash financing activities: |
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Withholding taxes in connection with stock-based awards, accrued |
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$ |
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$ |
( |
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Repurchases of common stock, accrued |
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$ |
( |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
4
PTC Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
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Three months ended December 31, 2021 |
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Common Stock |
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Accumulated |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Retained Earnings |
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Other Comprehensive Loss |
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Total Stockholders’ Equity |
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Balance as of September 30, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Common stock issued for employee stock-based awards |
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( |
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— |
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— |
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— |
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Shares surrendered by employees to pay taxes related to stock-based awards |
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( |
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( |
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( |
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— |
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— |
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( |
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Compensation expense from stock-based awards |
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— |
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— |
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— |
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— |
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Repurchases of common stock |
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( |
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( |
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( |
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— |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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Unrealized gain on net investment hedges, net of tax |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Change in pension benefits, net of tax |
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— |
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— |
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— |
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— |
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Balance as of December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Three months ended December 31, 2020 |
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Common Stock |
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Accumulated |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Accumulated Deficit |
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Other Comprehensive Loss |
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Total Stockholders’ Equity |
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Balance as of September 30, 2020 |
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( |
) |
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( |
) |
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Common stock issued for employee stock-based awards |
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( |
) |
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— |
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— |
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— |
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Shares surrendered by employees to pay taxes related to stock-based awards |
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( |
) |
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( |
) |
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( |
) |
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— |
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— |
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( |
) |
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Compensation expense from stock-based awards |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Unrealized loss on net investment hedges, net of tax |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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— |
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Unrealized loss on marketable securities, net of tax |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Change in pension benefits, net of tax |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of December 31, 2020 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
5
PTC Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
General
The accompanying unaudited condensed consolidated financial statements include the accounts of PTC Inc. and its wholly owned subsidiaries and have been prepared by management in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and in accordance with the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited quarterly financial statements should be read in conjunction with our annual consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair statement of our financial position, results of operations and cash flows at the dates and for the periods indicated. The September 30, 2021 Consolidated Balance Sheet included herein is derived from our audited consolidated financial statements.
Unless otherwise indicated, all references to a year mean our fiscal year, which ends on September 30.
Risks and Uncertainties - COVID-19 Pandemic
The COVID-19 pandemic that began in early 2020 continues to significantly affect global economic activity and create macroeconomic uncertainty.
We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of the COVID-19 pandemic as of December 31, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to, our allowance for doubtful accounts, stock-based compensation, the carrying value of our goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition. While our assessment did not result in a material impact to our consolidated financial statements as of and for the quarter ended December 31, 2021, our future assessment could result in material impacts to our consolidated financial statements in future reporting periods.
Recently Adopted Accounting Pronouncements
Income Taxes
In December 2019, the FASB issued Accounting Standards Update ASU 2019-12, Income Taxes (Topic 740) on Simplifying the Accounting for Income Taxes. The decisions reflected in ASU 2019-12 update specific areas of ASC 740, Income Taxes, to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements. The new standard became effective for us in this first quarter of 2022 ending December 31, 2021 and did not have a material impact on our consolidated financial statements.
Pending Accounting Pronouncements
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. ASU 2020-04 is effective for all entities upon issuance through December 31, 2022. We are still evaluating the impact, but do not expect the standard to have a material impact on our consolidated financial statements.
Business Combinations
In October 2021, the FASB issued Accounting Standards Update ASU 2021-08, Business Combinations (Topic 805) on Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU is intended to improve the accounting for acquired revenue contracts with customers in a business combination by
6
addressing diversity in practice and inconsistency related to 1) recognition of an acquired contract asset and liability, and 2) payment terms and their effect on subsequent revenue recognized by the acquirer. ASU 2021-08 will be effective for us in the first quarter of 2024, though early adoption of the standard is permitted. We are currently evaluating the impact the standard will have on our consolidated financial statements, but at this time we do not expect it to be material for prior acquisitions. The impact in future periods will depend on the contract assets and contract liabilities acquired in future business combinations.
2. Revenue from Contracts with Customers
Contract Assets and Contract Liabilities
|
(in thousands) |
|
December 31, 2021 |
|
|
September 30, 2021 |
|
||
|
Contract asset |
|
$ |
|
|
|
$ |
|
|
|
Deferred revenue |
|
$ |
|
|
|
$ |
|
|
As of December 31, 2021, $
During the three months ended December 31, 2021, we recognized $
Our multi-year, non-cancellable on-premises subscription contracts provide customers with an annual right to exchange software within the subscription with other software. As of December 31, 2021 and September 30, 2021, the total refund liability was $
We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. In determining the adequacy of the allowance for doubtful accounts, management specifically analyzes individual accounts receivable, historical bad debts, customer concentrations, customer credit-worthiness, current economic conditions, and accounts receivable aging trends. Our allowance for doubtful accounts on trade accounts receivable was $
Costs to Obtain or Fulfill a Contract
We recognize an asset for the incremental costs of obtaining a contract with a customer if the benefit of those costs is expected to be longer than one year. These deferred costs primarily related to commissions. As of December 31, 2021 and September 30, 2021, deferred costs of $
Remaining Performance Obligations
Our contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. As of December 31, 2021, the amounts include additional performance obligations of $
7
Disaggregation of Revenue
|
(in thousands) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Recurring revenue(1) |
|
$ |
|
|
|
$ |
|
|
|
Perpetual license |
|
|
|
|
|
|
|
|
|
Professional services |
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
|
|
(1) |
Recurring revenue is comprised of subscription, perpetual support, and SaaS revenue. |
For further disaggregation of revenue by geographic region and product group see Note 11. Segment and Geographic Information.
3. Restructuring and Other Charges
Restructuring and other charges, net includes restructuring charges (credits) and impairment and accretion expense charges related to the lease assets of exited facilities. Refer to Note 14. Leases for additional information about exited facilities.
In the three months ended December 31, 2021, restructuring and other charges, net totaled $
In the three months ended December 31, 2020, restructuring and other charges, net totaled $
Restructuring Charges
In the first quarter of 2022, we committed to a plan to restructure our workforce and consolidate select facilities to align our customer facing and product-related functions with the SaaS industry best practices and accelerate the opportunity for our on-premise customers to move to the cloud. The restructuring plan resulted in charges of $
In the first quarter of 2020, we initiated a restructuring program as part of a realignment associated with expected synergies and operational efficiencies related to the Onshape acquisition. The restructuring plan resulted in charges of $
The following table summarizes restructuring accrual activity for the three months ended December 31, 2021:
|
(in thousands) |
|
Employee Severance and Related Benefits |
|
|
Facility Closures and Related Costs |
|
|
Total |
|
|||
|
Accrual, October 1, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Charges to operations, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash disbursements |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Foreign exchange impact |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
Accrual, December 31, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The following table summarizes restructuring accrual activity for the three months ended December 31, 2020:
|
(in thousands) |
|
Employee Severance and Related Benefits |
|
|
Facility Closures and Related Costs |
|
|
Total |
|
|||
|
Accrual, October 1, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Charges to operations, net |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
Cash disbursements |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Foreign exchange impact |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual, December 31, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
8
The accrual for employee severance and related benefits is included in accrued compensation and benefits in the Consolidated Balance Sheets.
The accrual for facility closures and related costs is included in accrued expenses and other current liabilities in the Consolidated Balance Sheets.
4. Stock-based Compensation
Our equity incentive plan provides for grants of nonqualified and incentive stock options, common stock, restricted stock, restricted stock units (RSUs) and stock appreciation rights to employees, directors, officers and consultants. We award RSUs as our principal equity incentive awards.
The following table shows RSU activity for the three months ended December 31, 2021:
|
(in thousands, except grant date fair value data) |
|
Number of RSUs |
|
|
Weighted-Average Grant Date Fair Value Per RSU |
|
||
|
Balance of outstanding restricted stock units, October 1, 2021 |
|
|
|
|
|
$ |
|
|
|
Granted(1) |
|
|
|
|
|
$ |
|
|
|
Vested |
|
|
( |
) |
|
$ |
|
|
|
Forfeited or not earned |
|
|
( |
) |
|
$ |
|
|
|
Balance of outstanding restricted stock units, December 31, 2021 |
|
|
|
|
|
$ |
|
|
|
(1) |
Restricted stock units granted includes |
|
(in thousands) |
|
Three months ended December 31, 2021 |
|
|
|
Performance-based RSUs(1) |
|
|
|
|
|
Service-based RSUs(2) |
|
|
|
|
|
Total Shareholder Return RSUs(3) |
|
|
|
|
|
(1) |
The performance-based RSUs were granted to our executives and are eligible to vest based upon annual increasing performance measures over a period. To the extent earned, those performance-based RSUs will vest in |
|
(2) |
The service-based RSUs were granted to employees, including our executive officers. Substantially all service-based RSUs will vest in |
|
(3) |
The Total Shareholder Return RSUs (TSR RSUs) were granted to our executives and are eligible to vest based on the performance of PTC stock relative to the stock performance of an index of PTC peer companies established as of the grant date, as determined at the end of the measurement period ending on September 30, 2024. The RSUs earned will vest on November 15, 2024. Up to a maximum of |
The weighted-average fair value of the TSR RSUs was $
The significant assumptions used in the Monte Carlo simulation model were as follows:
|
Average volatility of peer group |
|
|
|
% |
|
Risk free interest rate |
|
|
|
% |
|
Dividend yield |
|
|
|
% |
9
Compensation expense recorded for our stock-based awards is classified in our Consolidated Statements of Operations as follows:
|
(in thousands) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Cost of license revenue |
|
$ |
|
|
|
$ |
|
|
|
Cost of support and cloud services revenue |
|
|
|
|
|
|
|
|
|
Cost of professional services revenue |
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense |
|
$ |
|
|
|
$ |
|
|
Stock-based compensation expense includes $
5. Earnings per Share (EPS) and Common Stock
EPS
The following table presents the calculation for both basic and diluted EPS:
|
(in thousands, except per share data) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Net income |
|
$ |
|
|
|
$ |
|
|
|
Weighted-average shares outstanding—Basic |
|
|
|
|
|
|
|
|
|
Dilutive effect of restricted stock units |
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding—Diluted |
|
|
|
|
|
|
|
|
|
Earnings per share—Basic |
|
$ |
|
|
|
$ |
|
|
|
Earnings per share—Diluted |
|
$ |
|
|
|
$ |
|
|
There were
Common Stock Repurchases
Our Articles of Organization authorize us to issue up to
6. Acquisitions
Acquisition-related costs in the first quarter of 2022 totaled $
Acquisition-related costs include direct costs of potential and completed acquisitions (e.g., investment banker fees and professional fees, including legal and valuation services) and expenses related to acquisition integration activities (e.g., professional fees and severance). In addition, subsequent adjustments to our initial estimated amount of contingent consideration associated with specific acquisitions are included within acquisition-related charges.
Our results of operations include the results of acquired businesses beginning on their respective acquisition date. Our results of operations for the reported periods, if presented on a pro forma basis, would not differ materially from our reported results.
10
Arena
On January 15, 2021, we acquired Arena Holdings, Inc. (“Arena”) pursuant to the Agreement and Plan of Merger dated as of December 12, 2020 by and among PTC, Arena, Astronauts Merger Sub, Inc., and the Representative named therein, the material terms of which are described in the Form 8-K filed by PTC on December 14, 2020 and which is filed as Exhibit 1.1 to that Form 8-K. PTC paid approximately $
The acquisition of Arena has been accounted for as a business combination. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The fair values of intangible assets were based on valuations using a discounted cash flow model which requires the use of significant estimates and assumptions, including estimating future revenues and costs. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill.
The purchase price allocation resulted in $
7. Goodwill and Intangible Assets
We have
As of December 31, 2021, goodwill and acquired intangible assets in the aggregate attributable to our Software Products segment was $
We completed our annual goodwill impairment review as of June 30, 2021, based on a qualitative assessment. Our qualitative assessment included company-specific (e.g., financial performance and long-range plans), industry, and macroeconomic factors, as well as consideration of the fair value of each reporting unit relative to its carrying value at the last valuation date (June 27, 2020). Based on our qualitative assessment, we believe it is more likely than not that the fair values of our reporting units exceed their carrying values and no further impairment testing is required. Through December 31, 2021, there were no events or changes in circumstances that indicated that the carrying values of goodwill or acquired intangible assets may not be recoverable.
11
Goodwill and acquired intangible assets consisted of the following:
|
(in thousands) |
|
December 31, 2021 |
|
|
September 30, 2021 |
|
||||||||||||||||||
|
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Book Value |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Book Value |
|
||||||
|
Goodwill (not amortized) |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Intangible assets with finite lives (amortized): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased software |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Capitalized software |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer lists and relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks and trade names |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets with finite lives |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Total goodwill and acquired intangible assets |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Goodwill
Changes in goodwill presented by reportable segments were as follows:
|
(in thousands) |
|
Software Products |
|
|
Professional Services |
|
|
Total |
|
|||
|
Balance, October 1, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Balance, December 31, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Amortization of Intangible Assets
The aggregate amortization expense for intangible assets with finite lives is classified in our Consolidated Statements of Operations as follows:
|
(in thousands) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Amortization of acquired intangible assets |
|
$ |
|
|
|
$ |
|
|
|
Cost of license revenue |
|
|
|
|
|
|
|
|
|
Total amortization expense |
|
$ |
|
|
|
$ |
|
|
8. Fair Value Measurements
Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. GAAP prescribes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value:
|
|
• |
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
|
|
• |
Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or |
|
|
• |
Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
12
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Time deposits and corporate notes/bonds are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets.
The principal market in which we execute our foreign currency derivatives is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large financial institutions. Our foreign currency derivatives’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy.
Our significant financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and September 30, 2021 were as follows:
|
(in thousands) |
|
December 31, 2021 |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Convertible note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock buyback pending settlement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(in thousands) |
|
September 30, 2021 |
|
|||||||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
Financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents (1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Convertible note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
Financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(1)
Level 3 Investments
Convertible Note
In the fourth quarter of 2021, we invested $
Non-Marketable Equity Investments
The carrying value of our non-marketable equity investments is recorded in other assets on the Consolidated Balance Sheets and totaled $
13
Equity Securities
As of December 31, 2021, we owned
The following table provides a summary of changes in the fair value of our Level 3 investment in the Matterport, Inc. shares:
|
(in thousands) |
|
December 31, 2021 |
|
|
|
|
|
Fair Values |
|
|
|
Balance, October 1, 2021 |
|
$ |
|
|
|
Unrealized gains |
|
|
|
|
|
Reduction in discount due to lack of marketability(1) |
|
|
|
|
|
Balance, December 31, 2021 |
|
$ |
|
|
(1)
9. Marketable Securities
We did
10. Derivative Financial Instruments
We enter into derivative transactions, specifically foreign currency forward contracts and options, to manage our exposure to foreign currency exchange risk in order to reduce earnings volatility. We do not enter into derivative transactions for trading or speculative purposes.
The following table shows our derivative instruments measured at gross fair value as reflected in the Consolidated Balance Sheets:
|
(in thousands) |
|
Fair Value of Derivatives Designated As Hedging Instruments |
|
|
Fair Value of Derivatives Not Designated As Hedging Instruments |
|
||||||||||
|
|
|
December 31, 2021 |
|
|
September 30, 2021 |
|
|
December 31, 2021 |
|
|
September 30, 2021 |
|
||||
|
Derivative assets(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward Contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Options |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Derivative liabilities(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward Contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
(1) |
As of December 31, 2021 and September 30, 2021, current derivative assets of $ |
|
(2) |
As of December 31, 2021 and September 30, 2021, current derivative liabilities of $ |
Non-Designated Hedges
We hedge our net foreign currency monetary assets and liabilities primarily resulting from foreign currency denominated receivables and payables with foreign exchange forward contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These contracts have maturities of up to approximately
14
We hedge our forecasted U.S. Dollar cash flows with foreign exchange options to reduce the risk that they will be adversely affected by changes in Euro or Japanese Yen exchange rates. These contracts have maturities of up to approximately
As of December 31, 2021 and September 30, 2021, we had outstanding forward contracts and options with notional amounts equivalent to the following:
|
Currency Hedged (in thousands) |
|
December 31, 2021 |
|
|
September 30, 2021 |
|
||
|
Canadian / U.S. Dollar |
|
$ |
|
|
|
$ |
|
|
|
Euro / U.S. Dollar(1) |
|
|
|
|
|
|
|
|
|
British Pound / U.S. Dollar |
|
|
|
|
|
|
|
|
|
Israeli Shekel / U.S. Dollar |
|
|
|
|
|
|
|
|
|
Japanese Yen / U.S. Dollar(2) |
|
|
|
|
|
|
|
|
|
Swiss Franc / U.S. Dollar |
|
|
|
|
|
|
|
|
|
Swedish Krona / U.S. Dollar |
|
|
|
|
|
|
|
|
|
Singapore Dollar / U.S. Dollar |
|
|
|
|
|
|
|
|
|
Chinese Renminbi / U.S. Dollar |
|
|
|
|
|
|
|
|
|
New Taiwan Dollar / U.S. Dollar |
|
|
|
|
|
|
|
|
|
Romanian Leu/ U.S. Dollar |
|
|
|
|
|
|
|
|
|
Russian Ruble/ U.S. Dollar |
|
|
|
|
|
|
|
|
|
All other |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
(1) |
As of December 31, 2021, $ |
|
(2) |
As of December 31, 2021, $ |
The following table shows the effect of our non-designated hedges in the Consolidated Statements of Operations for the three months ended December 31, 2021 and December 31, 2020:
|
(in thousands) |
|
|
|
Three months ended |
|
|||||
|
|
|
Location of Loss |
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Net realized and unrealized loss, excluding the underlying foreign currency exposure being hedged |
|
Other income (expense), net |
|
$ |
( |
) |
|
$ |
( |
) |
In the three months ended December 31, 2021, foreign currency losses, net were $
Net Investment Hedges
We translate balance sheet accounts of subsidiaries with foreign functional currencies into the U.S. Dollar using the exchange rate at each balance sheet date. Resulting translation adjustments are reported as a component of accumulated other comprehensive loss on the Consolidated Balance Sheets. We designate certain foreign exchange forward contracts as net investment hedges against exposure on translation of balance sheet accounts of Euro functional subsidiaries. Net investment hedges partially offset the impact of foreign currency translation adjustment recorded in accumulated other comprehensive loss on the Consolidated Balance Sheets. All foreign exchange forward contracts are carried at fair value on the Consolidated Balance Sheets and the maximum duration of net investment hedge foreign exchange forward contracts is approximately
15
Net investment hedge relationships are designated at inception, and effectiveness is assessed retrospectively on a quarterly basis using the net equity position of Euro functional subsidiaries. As the forward contracts are highly effective in offsetting exchange rate exposure, we record changes in these net investment hedges in accumulated other comprehensive loss and subsequently reclassify them to foreign currency translation adjustment in accumulated other comprehensive loss at the time of forward contract maturity. Changes in the fair value of foreign exchange forward contracts due to changes in time value are excluded from the assessment of effectiveness. Our derivatives are not subject to any credit contingent features. We manage credit risk with counterparties by trading among several counterparties and we review our counterparties’ credit at least quarterly.
As of December 31, 2021 and September 30, 2021, we had outstanding forward contracts designated as net investment hedges with notional amounts equivalent to the following:
|
Currency Hedged (in thousands) |
|
December 31, 2021 |
|
|
September 30, 2021 |
|
||
|
Euro / U.S. Dollar |
|
$ |
|
|
|
$ |
|
|
The following table shows the effect of our derivative instruments designated as net investment hedges in the Consolidated Statements of Operations for the three months ended December 31, 2021 and December 31, 2020:
|
(in thousands) |
|
|
|
Three months ended |
|
|||||
|
|
|
Location of Gain (Loss) |
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Gain (loss) recognized in OCI |
|
OCI |
|
$ |
( |
) |
|
$ |
|
|
|
Gain (loss) reclassified from OCI |
|
OCI |
|
|
( |
) |
|
|
|
|
|
Gain recognized, excluded portion |
|
Other income (expense), net |
|
|
|
|
|
|
|
|
As of December 31, 2021, we estimate that all amounts reported in accumulated other comprehensive loss will be applied against exposed balance sheet accounts upon translation within the next three months.
Offsetting Derivative Assets and Liabilities
We have entered into master netting arrangements for our forward contracts that allow net settlements under certain conditions. Although netting is permitted, it is currently our policy and practice to record all derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets.
The following table sets forth the offsetting of derivative assets as of December 31, 2021:
|
(in thousands) |
|
Gross Amounts Offset in the Consolidated Balance Sheets |
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets |
|
|
|
|
|
||||||||||
|
As of December 31, 2021 |
|
Gross Amount of Recognized Assets |
|
|
Gross Amounts Offset in the Consolidated Balance Sheets |
|
|
Net Amounts of Assets Presented in the Consolidated Balance Sheets |
|
|
Financial Instruments |
|
|
Cash Collateral Received |
|
|
Net Amount |
|
||||||
|
Forward Contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
The following table sets forth the offsetting of derivative liabilities as of December 31, 2021:
|
(in thousands) |
|
Gross Amounts Offset in the Consolidated Balance Sheets |
|
|
|
|
|
|
Gross Amounts Not Offset in the Consolidated Balance Sheets |
|
|
|
|
|
||||||||||
|
As of December 31, 2021 |
|
Gross Amount of Recognized Liabilities |
|
|
Gross Amounts Offset in the Consolidated Balance Sheets |
|
|
Net Amounts of Liabilities Presented in the Consolidated Balance Sheets |
|
|
Financial Instruments |
|
|
Cash Collateral Pledged |
|
|
Net Amount |
|
||||||
|
Forward Contracts |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
11. Segment and Geographic Information
We operate within a single industry segment – computer software and related services. Operating segments as defined under GAAP are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to
16
allocate resources and in assessing performance. Our chief operating decision maker is our President and Chief Executive Officer. We have
The revenue and profit attributable to our operating segments are summarized below. We do not produce asset information by reportable segment; therefore, it is not reported.
|
(in thousands) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Software Products |
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
|
|
|
$ |
|
|
|
Operating costs(1) |
|
|
|
|
|
|
|
|
|
Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional Services |
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
Operating costs(2) |
|
|
|
|
|
|
|
|
|
Profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenue |
|
|
|
|
|
|
|
|
|
Total segment costs |
|
|
|
|
|
|
|
|
|
Total segment profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated operating expenses: |
|
|
|
|
|
|
|
|
|
Sales and marketing expenses |
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
|
|
|
|
|
|
|
Restructuring and other charges, net |
|
|
|
|
|
|
|
|
|
Intangibles amortization |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
Other unallocated operating expenses(3) |
|
|
|
|
|
|
|
|
|
Total operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and debt premium expense |
|
|
( |
) |
|
|
( |
) |
|
Other income (expense), net |
|
|
|
|
|
|
( |
) |
|
Income before income taxes |
|
$ |
|
|
|
$ |
|
|
|
(1) |
Operating costs for the Software Products segment include all costs of software revenue and research and development costs, excluding stock-based compensation and intangible amortization. |
|
(2) |
Operating costs for the Professional Services segment include all costs of professional services revenue, excluding stock-based compensation. |
|
(3) |
Other unallocated operating expenses include acquisition-related and other transactional costs. |
Our international revenue is presented based on the location of our customer. Revenue for the geographic regions in which we operate is presented below.
|
(in thousands) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Americas |
|
$ |
|
|
|
$ |
|
|
|
Europe |
|
|
|
|
|
|
|
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
|
|
|
$ |
|
|
12. Income Taxes
|
(in thousands) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Income before income taxes |
|
$ |
|
|
|
$ |
|
|
|
Provision for income taxes |
|
$ |
|
|
|
$ |
|
|
|
Effective income tax rate |
|
|
|
% |
|
|
|
% |
17
In the first quarter of 2022 and 2021, our effective tax rate differed from the statutory federal income tax rate of
In 2022 and 2021, in addition to the foreign rate differential, the effective tax rate was impacted by the net effects of the Global Intangible Low-Taxed Income (GILTI) and Foreign Derived Intangible Income (FDII) regimes and the excess tax benefit related to stock-based compensation.
In the first quarter of 2021, our results also include a charge of $
We reassess our valuation allowance requirements each financial reporting period. We assess available positive and negative evidence to estimate whether sufficient future taxable income will be generated to use our existing deferred tax assets. In the assessment for the period ended September 30, 2021, we concluded it was more likely than not that our deferred tax assets related to United States federal and state income would be realizable, and therefore, the United States federal and the majority of the state valuation allowances were released in the fourth quarter of 2021. In the first quarter of 2022, we continue to maintain this conclusion.
In the normal course of business, PTC and its subsidiaries are examined by various taxing authorities, including the Internal Revenue Service in the U.S. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. We are currently under audit by tax authorities in several jurisdictions. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, limitations on net operating losses and tax credits.
As of December 31, 2021 and September 30, 2021, we had unrecognized tax benefits of $
Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates. We believe it is reasonably possible that within the next 12 months the amount of unrecognized tax benefits related to the resolution of multi-jurisdictional tax positions could be reduced by up to $
13. Debt
At December 31, 2021 and September 30, 2021, we had the following long-term debt obligations:
|
(in thousands) |
|
December 31, 2021 |
|
|
September 30, 2021 |
|
||
|
4.000% Senior notes due 2028 |
|
$ |
|
|
|
$ |
|
|
|
3.625% Senior notes due 2025 |
|
|
|
|
|
|
|
|
|
Credit facility revolver(1) |
|
|
|
|
|
|
|
|
|
Total debt |
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs for the senior notes(2) |
|
|
( |
) |
|
|
( |
) |
|
Total debt, net of issuance costs |
|
$ |
|
|
|
$ |
|
|
|
(1) |
Unamortized debt issuance costs related to the credit facility were $ |
|
(2) |
Unamortized debt issuance costs are included in long-term debt on the Consolidated Balance Sheets. |
Senior Unsecured Notes
In February 2020, we issued $
18
As of December 31, 2021, the total estimated fair value of the 2028 and 2025 notes was approximately $
We were in compliance with all the covenants for all of our senior notes as of December 31, 2021.
Terms of the 2028 and 2025 Notes
Interest on the 2028 and 2025 notes is payable semi-annually on February 15 and August 15. The debt indenture for the 2028 and 2025 notes includes covenants that limit our ability to, among other things, incur additional debt, grant liens on our properties or capital stock, enter into sale and leaseback transactions or asset sales, and make capital distributions.
We may, on one or more occasions, redeem the 2028 and 2025 notes in whole or in part at specified redemption prices. In certain circumstances constituting a change of control, we will be required to make an offer to repurchase the notes at a purchase price equal to
Credit Agreement
In February 2020, we entered into a Third Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as Administrative Agent, for a new secured multi-currency bank credit facility with a syndicate of banks. We expect to use the new credit facility for general corporate purposes, including acquisitions of businesses, share repurchases and working capital requirements.
The credit facility consists of a $
PTC and certain eligible foreign subsidiaries are eligible borrowers under the credit facility. Any borrowings by PTC Inc. under the credit facility would be guaranteed by PTC Inc.’s material domestic subsidiaries that become parties to the subsidiary guaranty, if any. As of the filing of this Form 10-Q, there are no subsidiary guarantors of the obligations under the credit facility. Any borrowings by eligible foreign subsidiary borrowers would be guaranteed by PTC Inc. and any subsidiary guarantors. As of the filing of this Form 10-Q,
19
Loans under the credit facility bear interest at variable rates which reset every 30 to
The credit facility limits PTC’s and its subsidiaries’ ability to, among other things: incur additional indebtedness, incur liens or guarantee obligations; pay dividends (other than to PTC) and make other distributions; make investments and enter into joint ventures; dispose of assets; and engage in transactions with affiliates, except on an arms-length basis. Under the credit facility, PTC and its material domestic subsidiaries may not invest cash or property in, or loan to, PTC’s foreign subsidiaries in aggregate amounts exceeding $
|
|
• |
Total leverage ratio, defined as consolidated funded indebtedness to consolidated trailing four quarters EBITDA, not to exceed |
|
|
• |
Senior secured leverage ratio, defined as senior consolidated total indebtedness (which excludes unsecured indebtedness) to the consolidated trailing four quarters EBITDA, not to exceed |
|
|
• |
Interest coverage ratio, defined as the ratio of consolidated trailing four quarters EBITDA to consolidated trailing four quarters of cash basis interest expense, of not less than |
As of December 31, 2021, our total leverage ratio was
Any failure to comply with the financial or operating covenants of the credit facility would prevent PTC from being able to borrow additional funds, and would constitute a default, permitting the lenders to, among other things, accelerate the amounts outstanding, including all accrued interest and unpaid fees, under the credit facility and to terminate the credit facility. A change in control of PTC, as defined in the agreement, also constitutes an event of default, permitting the lenders to accelerate the indebtedness and terminate the credit facility.
In the first quarter of 2022 and 2021, we paid $
14. Leases
Our operating leases expire at various dates through
Our headquarters are located at 121 Seaport Boulevard, Boston, Massachusetts. In February 2019, we subleased a portion of our headquarters through June 30, 2022. We will receive approximately $
The components of lease cost reflected in the Consolidated Statement of Operations for the three months ended December 31, 2021 and December 31, 2020 were as follows:
|
(in thousands) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Operating lease cost |
|
$ |
|
|
|
$ |
|
|
|
Short-term lease cost |
|
|
|
|
|
|
|
|
|
Variable lease cost |
|
|
|
|
|
|
|
|
|
Sublease income |
|
|
( |
) |
|
|
( |
) |
|
Total lease cost |
|
$ |
|
|
|
$ |
|
|
20
Supplemental cash flow and right-of-use assets information for the three months ended December 31, 2021 and December 31, 2020 was as follows:
|
(in thousands) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases |
|
$ |
|
|
|
$ |
|
|
|
Financing cash flows from financing leases |
|
$ |
|
|
|
$ |
|
|
|
Right-of-use assets obtained in exchange for new lease obligations: |
|
|
|
|
|
|
|
|
|
Operating leases |
|
$ |
|
|
|
$ |
|
|
|
Financing leases |
|
$ |
|
|
|
$ |
|
|
Supplemental balance sheet information related to the leases as of December 31, 2021 was as follows:
|
Weighted-average remaining lease term - operating leases |
|
|
|
|
Weighted-average remaining lease term - financing leases |
|
|
|
|
Weighted-average discount rate - operating leases |
|
|
% |
|
Weighted-average discount rate - financing leases |
|
|
% |
Maturities of lease liabilities as of December 31, 2021 are as follows:
|
(in thousands) |
|
|
|
|
|
Remainder of 2022 |
|
$ |
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total future lease payments |
|
$ |
|
|
|
Less: imputed interest |
|
|
( |
) |
|
Total lease liability |
|
$ |
|
|
Exited (Restructured) Facilities
As of December 31, 2021, we have net liabilities of $
In determining the amount of right-of-use assets for restructured facilities, we are required to estimate such factors as future vacancy rates, the time required to sublet properties and sublease rates. Updates to these estimates may result in revisions to the value of right-of-use assets recorded. The amounts recorded are based on the net present value of estimated sublease income. As of December 31, 2021, the right-of-use assets for exited facilities reflects discounted committed sublease income of approximately $
In the first quarter of 2022 and 2021, we made net payments of $
15. Commitments and Contingencies
As December 31, 2021 and December 31, 2020, we had letters of credit and bank guarantees outstanding of $
Legal and Regulatory Matters
Legal Proceedings
With respect to legal proceedings and claims, we record an accrual for a contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
21
401(k) Plan
On
Other Legal Proceedings
In addition to the matters listed above, we are subject to legal proceedings and claims against us in the ordinary course of business. As of December 31, 2021, we estimate that the range of possible outcomes for such matters is immaterial and we do not believe that resolving them will have a material adverse impact on our financial condition, results of operations or cash flows. However, the results of legal proceedings cannot be predicted with certainty. Should any of these legal proceedings and claims be resolved against us, the operating results for a reporting period could be adversely affected.
Guarantees and Indemnification Obligations
We enter into standard indemnification agreements with our customers and business partners in the ordinary course of our business. Under such agreements, we typically indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, in connection with patent, copyright or other intellectual property infringement claims by any third party with respect to our products. Indemnification may also cover other types of claims, including claims relating to certain data breaches. Except for intellectual property infringement indemnification, the liability for which is uncapped, these agreements typically limit our liability with respect to other indemnification claims. Historically, our costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and, accordingly, we believe the estimated fair value of liabilities under these agreements is immaterial.
We warrant that our software products will perform in all material respects in accordance with our standard published specifications during the term of the license/subscription. Additionally, we generally warrant that our consulting services will be performed consistent with generally accepted industry standards and, in the case of fixed price services, the agreed-upon specifications. In most cases, liability for these warranties is capped. If necessary, we would provide for the estimated cost of product and service warranties based on specific warranty claims and claim history; however, we have not incurred significant cost under our product or services warranties. As a result, we believe the estimated fair value of these liabilities is immaterial.
16. Subsequent Events
Credit Facility Loan Repayment
On February 2, 2022, we paid $
Sale of Matterport Equity Securities
In January 2022, we sold
Stock Repurchase Settlement
In January 2022, we settled the trades we entered to purchase an incremental
22
|
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Business Overview
PTC is a global software and services company that enables industrial companies to improve growth and profitability with a portfolio of innovative digital solutions that work together to transform how physical products are engineered, manufactured, and serviced. Our award-winning technology portfolio spans the computer-aided design (CAD), product lifecycle management (PLM), Industrial Internet of Things (IIoT), and Augmented Reality (AR) markets.
Our customer base includes some of the world’s most innovative manufacturers in the aerospace and defense, automotive, electronics and high tech, industrial machinery and equipment, life sciences, oil and gas, retail and consumer products industries. Our solutions enable industrial companies to create a closed loop of information shared across their organization’s entire value chain. This “digital thread” can drive excellence in engineering, efficiency in manufacturing operations and service delivery, and innovation across product offerings and business models. With our solutions, digital transforms physical.
We generate revenue through the sale of software subscriptions, which include license access and support (technical support and software updates); support for existing perpetual licenses; professional services (consulting, implementation, and training); and cloud services (hosting for our software and Software as a Service (SaaS)).
Forward-Looking Statements
Statements in this document 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 COVID-19 pandemic, which could cause customers to delay or reduce purchases of new software, reduce the number of subscriptions they carry, or delay payments to us, all of which would adversely affect ARR and/or 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 restructuring and 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 repay amounts under our credit facility or to return 50% of free cash flow to shareholders, and other uses of cash or our credit facility limits or other matters could preclude such repayment and/or repurchases; 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, as well as other risks and uncertainties described below throughout or referenced in Part II, Item 1A. Risk Factors of this report.
Operating and Non-GAAP Financial Measures
Our discussion of results includes discussion of our ARR (Annual Run Rate) operating measure, non-GAAP financial measures, and disclosure of our results on a constant currency basis. ARR and our non-GAAP financial measures, including the reasons we use those measures, are described below in Results of Operations - Operating Measure and Results of Operations - Non-GAAP Financial Measures, respectively. The methodology used to calculate constant currency disclosures is described in Results of Operations - Impact of Foreign Currency Exchange on Results of Operations. You should read those sections to understand our operating measure, non-GAAP financial measures, and constant currency disclosures.
Executive Overview
ARR of $1.50 billion at the end of Q1’22 represents 12% growth (16% on a constant currency basis) compared to Q1’21 driven by strength in new bookings. Organic constant currency ARR growth year over year was 11%. Q1’22 revenue of $458 million was up 7% (8% constant currency) over Q1’21, driven by increased revenue from our recurring revenue business lines, including the revenue contribution from the Arena acquisition, and an increase in professional services revenues. Q1’22 operating margin was 14% compared to 21% in Q1’21, primarily due to $34 million of restructuring charges recorded in Q1’22. Q1’22 non-GAAP operating margin was 35% compared to 36% in Q1’21 due to lower up-front license revenue recognized in the quarter as a result of the mix of contract types and contract durations in Q1’22 compared to Q1’21, which also impacted Q1’22 EPS compared to Q1’21 EPS.
23
Q1’22 EPS reflects a lower tax rate compared to the prior year as Q1’21 included a charge of $35.3 million related to a South Korean tax matter, primarily related to foreign withholding taxes.
We generated a first quarter record of $138 million of cash from operations in Q1’22 compared to $114 million in Q1’21, with the increase driven by strong operational execution. Cash from operations in Q1’22 included $11 million of payments related to restructuring, compared to $7 million of restructuring payments made in Q1’21. We repurchased $120 million of our common stock in Q1’22 and ended Q1’22 with cash and cash equivalents of $296 million. In addition, we held an equity investment in Matterport, Inc., which was valued at $87 million and subject to trading restrictions as of the end of Q1’22. We sold our investment in Matterport near the end of January 2022 (in Q2’22) for an aggregate of $39 million.
Results of Operations
The following table shows the financial measures that we consider the most significant indicators of our business performance. In addition to providing operating income, operating margin, diluted earnings per share and cash from operations as calculated under GAAP, we provide non-GAAP operating income, non-GAAP operating margin, non-GAAP diluted earnings per share, and free cash flow for the reported periods. We also provide a view of our actual results on a constant currency basis. These non-GAAP financial measures exclude the items described in Non-GAAP Financial Measures below. Investors should use these non-GAAP financial measures only in conjunction with our GAAP results.
|
(Dollar amounts in millions, except per share data) |
|
Three months ended |
|
|
Percent Change |
|
||||||||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Actual |
|
|
Constant Currency(1) |
|
||||
|
ARR(1) |
|
$ |
1,496.3 |
|
|
$ |
1,336.1 |
|
|
|
12 |
% |
|
|
16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total recurring revenue(2) |
|
$ |
405.1 |
|
|
$ |
385.0 |
|
|
|
5 |
% |
|
|
6 |
% |
|
Perpetual license |
|
|
8.5 |
|
|
|
8.5 |
|
|
|
0 |
% |
|
|
0 |
% |
|
Professional services |
|
|
44.1 |
|
|
|
35.6 |
|
|
|
24 |
% |
|
|
26 |
% |
|
Total revenue |
|
|
457.7 |
|
|
|
429.1 |
|
|
|
7 |
% |
|
|
8 |
% |
|
Total cost of revenue |
|
|
95.1 |
|
|
|
86.8 |
|
|
|
10 |
% |
|
|
10 |
% |
|
Gross margin |
|
|
362.6 |
|
|
|
342.2 |
|
|
|
6 |
% |
|
|
7 |
% |
|
Operating expenses |
|
|
300.4 |
|
|
|
251.9 |
|
|
|
19 |
% |
|
|
19 |
% |
|
Total costs and expenses |
|
|
395.5 |
|
|
|
338.7 |
|
|
|
17 |
% |
|
|
17 |
% |
|
Operating income |
|
$ |
62.2 |
|
|
$ |
90.3 |
|
|
|
(31 |
)% |
|
|
(29 |
)% |
|
Non-GAAP operating income(3) |
|
$ |
158.1 |
|
|
$ |
153.4 |
|
|
|
3 |
% |
|
|
6 |
% |
|
Operating margin |
|
|
13.6 |
% |
|
|
21.1 |
% |
|
|
|
|
|
|
|
|
|
Non-GAAP operating margin(3) |
|
|
34.5 |
% |
|
|
35.8 |
% |
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
0.39 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
Non-GAAP diluted earnings per share(3)(4) |
|
$ |
0.95 |
|
|
$ |
0.97 |
|
|
|
|
|
|
|
|
|
|
Cash flow from operations(5) |
|
$ |
137.7 |
|
|
$ |
113.8 |
|
|
|
|
|
|
|
|
|
|
Free cash flow(6) |
|
$ |
134.4 |
|
|
$ |
110.9 |
|
|
|
|
|
|
|
|
|
|
(1) |
For go-forward comparability purposes, $7 million of ARR was removed in the period ended December 31, 2020 associated with a Vuforia AR product which we no longer intend to sell on a recurring basis beginning in FY’22. |
|
(2) |
Recurring revenue is comprised of subscription, perpetual support, and SaaS revenue. |
|
(3) |
See Non-GAAP Financial Measures below for a reconciliation of our GAAP results to our non-GAAP financial measures and Impact of Foreign Currency Exchange on Results of Operations below for a description of how we calculate our results on a constant currency basis. |
|
(4) |
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. In Q1’21 we had recorded a full valuation allowance against our U.S. net deferred tax assets. As we were profitable on a non-GAAP basis, the Q1’21 tax provision was calculated assuming there was no valuation allowance. Additionally, our Q1’21 non-GAAP financial measures excluded tax expense of $34.6 million related to a South Korean tax exposure, primarily related to foreign withholding taxes. |
|
(5) |
Cash flow from operations for Q1'22 includes $10.5 million of restructuring payments. Cash flow from operations for Q1'21 includes $7.3 million of restructuring payments and $2.9 million of acquisition-related payments. |
|
(6) |
Free cash flow is cash from operations net of capital expenditures of $3.4 million and $2.9 million in Q1'22 and Q1'21, respectively. |
Impact of Foreign Currency Exchange on Results of Operations
Approximately 55% of our revenue and 35% of our expenses are transacted in currencies other than the U.S. Dollar. Because we report our results of operations in U.S. Dollars, currency translation, particularly changes in the Euro, Yen, Shekel, and Rupee relative to the U.S. Dollar, affects our reported results. Our constant currency disclosures are calculated by multiplying the results in local currency for the quarterly periods for FY’22 and FY’21 by the exchange rates in effect on September 30, 2021. We anticipate foreign currency exchange rates will be a headwind for FY’22.
24
The results of operations in the table above and revenue by line of business, product group, and geographic region in the tables that follow present both actual percentage changes year over year and percentage changes on a constant currency basis.
Revenue
Under ASC 606, the volume, mix, and duration of contract types (support, SaaS, subscription) starting or renewing in any given period may have a material impact on revenue in the period. Subscription contracts have up-front recognition of subscription license revenue, with the support element of the contract recognized ratably over the term. Perpetual support contracts are recognized ratably over the term of the contract, however we continue to convert to subscription contracts resulting in a shift to up-front recognition of subscription license revenue in the period converted compared to ratable recognition for a perpetual support renewal. Revenue from our SaaS contracts is recognized ratably. We are expanding our SaaS offerings and are releasing additional cloud functionality into our products and customers are migrating from subscription to SaaS products. As a result, over time a higher portion of our revenue will be recognized ratably. Given the different mix, duration and volume of new and renewing contracts in any period, year of year or sequential revenue comparisons can have significant variability.
Revenue by Line of Business
|
(Dollar amounts in millions) |
|
Three months ended |
|
|
Percent Change |
|
||||||||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Actual |
|
|
Constant Currency |
|
||||
|
License |
|
$ |
169.1 |
|
|
$ |
177.2 |
|
|
|
(5 |
)% |
|
|
(4 |
)% |
|
Support and cloud services |
|
|
244.5 |
|
|
|
216.2 |
|
|
|
13 |
% |
|
|
14 |
% |
|
Software revenue |
|
|
413.6 |
|
|
|
393.4 |
|
|
|
5 |
% |
|
|
6 |
% |
|
Professional services |
|
|
44.1 |
|
|
|
35.6 |
|
|
|
24 |
% |
|
|
26 |
% |
|
Total revenue |
|
$ |
457.7 |
|
|
$ |
429.1 |
|
|
|
7 |
% |
|
|
8 |
% |
Software revenue in Q1’22 increased over Q1’21 primarily due to contribution from the acquisition of Arena, as well as subscription support growth in Digital Thread – Core, offset by a decline in perpetual support revenue due to conversions of support contracts to subscriptions. Subscription license revenue decreased in Q1’22 compared to Q1’21 due to the duration and mix of contract types for new and renewal contracts started in the quarter. Under ASC 606, shorter duration contracts result in less up-front license revenue, even if the annualized values are consistent.
Professional services revenue increased in Q1’22 over Q1’21 by 24% (26% constant currency) as Q1’21 revenue was negatively impacted by challenges with project scoping and implementation activities and performance due to social distancing measures and facility closures implemented to address the COVID-19 pandemic. Q1’22 saw an increase in revenue associated with large PLM consulting engagements, particularly with automotive, aerospace and defense customers. Q1’21 professional services revenue was also lower due to a prior-year extension to complete work on a large fixed-price contract.
We expect that professional services revenue will be higher in FY'22 than FY’21 or FY’20 as we expect demand for services will increase to a level that is more consistent with pre-pandemic levels. Our longer-term expectation is that professional services revenue will trend flat-to-down over time due to our strategy to expand margins by migrating more services engagements to our partners and delivering products that require less consulting and training services.
Software Revenue by Product Group
|
(Dollar amounts in millions) |
|
Three months ended |
|
|
Percent Change |
|
||||||||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Actual |
|
|
Constant Currency |
|
||||
|
Digital Thread - Core |
|
$ |
282.1 |
|
|
$ |
289.5 |
|
|
|
(3 |
)% |
|
|
(2 |
)% |
|
Digital Thread - Growth |
|
|
62.0 |
|
|
|
55.3 |
|
|
|
12 |
% |
|
|
13 |
% |
|
Digital Thread - FSG |
|
|
51.6 |
|
|
|
46.2 |
|
|
|
12 |
% |
|
|
12 |
% |
|
Digital Thread (Total) |
|
|
395.7 |
|
|
|
391.0 |
|
|
|
1 |
% |
|
|
2 |
% |
|
Velocity |
|
|
17.9 |
|
|
|
2.4 |
|
|
|
646 |
% |
|
|
646 |
% |
|
Software revenue |
|
$ |
413.6 |
|
|
$ |
393.4 |
|
|
|
5 |
% |
|
|
6 |
% |
25
Digital Thread
Core Product software revenue declined in Q1’22 compared to Q1’21, driven by a decline in subscription license revenue due to the duration and mix of contract types for new and renewal contracts started in the quarter. Under ASC 606, shorter duration contracts result in less up-front license revenue, even if the annualized values are consistent. Subscription support revenues increased 19% in Q1’22 compared to Q1’22 (21% constant currency), offset by a decrease in perpetual support revenue as customers have continued to convert from perpetual support to subscriptions.
ARR increased 7% (11% constant currency) for Q1’22 compared to Q1’21, reflecting double-digit constant currency growth in both CAD and PLM driven by higher than anticipated new bookings and a low rate of churn.
Growth Product software revenue increased in Q1’22 over Q1’21 due to subscription revenue growth of 16% (17% constant currency), resulting in recurring revenue growth of 15% (16% constant currency).
Growth Product ARR increased 11% (14% constant currency) for Q1’22 compared to Q1’21, reflecting double-digit growth in AR and IoT, primarily from expansion deals with existing customers. We anticipate continued improvement in IoT market conditions and the introduction of our new Digital Performance Management offering will continue to drive demand for our Growth Products.
FSG Product software revenue growth in Q1’22 reflects subscription revenue growth of 26% (actual and constant currency) over Q1’21 due to a few large contracts with longer durations, offset by a 17% (actual and constant currency) decline in perpetual support revenue due to conversions of support contracts to subscriptions.
FSG product ARR increased by 4% (6% constant currency) for Q1’22 compared to Q1’21 driven primarily by new bookings.
Velocity
Velocity Product software revenue and ARR growth in Q1’22 compared to Q1’21 are due to the acquisition and subsequent growth of the Arena business purchased in January 2021, as well as growth in Onshape.
Software Revenue by Geographic Region
A significant portion of our software revenue is generated outside the U.S. In the first three months of FY'22 and FY'21 approximately 45% to 50% of software revenue was generated in the Americas, 30% to 35% in Europe, and 15% to 20% in Asia Pacific.
|
(Dollar amounts in millions) |
|
Three months ended |
|
|
Percent Change |
|
||||||||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Actual |
|
|
Constant Currency |
|
||||
|
Americas |
|
$ |
196.8 |
|
|
$ |
191.0 |
|
|
|
3 |
% |
|
|
3 |
% |
|
Europe |
|
|
140.8 |
|
|
|
144.8 |
|
|
|
(3 |
)% |
|
|
(1 |
)% |
|
Asia Pacific |
|
|
76.0 |
|
|
|
57.6 |
|
|
|
32 |
% |
|
|
35 |
% |
|
Software revenue |
|
$ |
413.6 |
|
|
$ |
393.4 |
|
|
|
5 |
% |
|
|
6 |
% |
Americas software revenue growth in Q1’22 was primarily driven by the contribution of the Arena acquisition, offset by a decline in Digital Thread – Core subscription license revenue due to the duration and mix of contract types for new and renewal contracts started in the quarter. Under ASC 606, shorter duration contracts result in less up-front license revenue, even if the annualized values are consistent.
Q1’22 Americas ARR was up 19% over Q1’21, led by Arena’s contribution and the Velocity business overall, as well as strength in our Core products.
Europe software revenue declined in Q1’22 primarily due to the decrease in Digital Thread – Core subscription license revenue due to the duration and mix of contract types for new and renewal contracts started in the quarter, partially offset by an increase in Digital Thread – Growth cloud services revenue.
Q1’22 ARR in Europe was up 6% (13% constant currency) over Q1’21, led by mid-30s growth in our Digital Thread Growth products and strength in our Core products.
26
Asia Pacific software revenue growth in Q1’22 was driven by subscription revenue growth of 51% (54% constant currency) over Q1’21 due to a few large multi-year renewal transactions resulting in higher up-front subscription license revenue under ASC 606.
Q1’22 ARR in Asia Pacific was up 8% (14% constant currency) over Q1’21, led by mid-teens growth in Core products.
Gross Margin
|
(Dollar amounts in millions) |
|
Three months ended |
|
|
|
|
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Percent Change |
|
|||
|
License gross margin |
|
$ |
159.3 |
|
|
$ |
163.9 |
|
|
|
(3 |
)% |
|
License gross margin percentage |
|
|
94 |
% |
|
|
93 |
% |
|
|
|
|
|
Support and cloud services gross margin |
|
$ |
198.6 |
|
|
$ |
177.9 |
|
|
|
12 |
% |
|
Support and cloud services gross margin percentage |
|
|
81 |
% |
|
|
82 |
% |
|
|
|
|
|
Professional services gross margin |
|
$ |
4.7 |
|
|
$ |
0.4 |
|
|
|
1078 |
% |
|
Professional services gross margin percentage |
|
|
11 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross margin |
|
$ |
362.6 |
|
|
$ |
342.2 |
|
|
|
6 |
% |
|
Total gross margin percentage |
|
|
79 |
% |
|
|
80 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP gross margin(1) |
|
$ |
375.1 |
|
|
$ |
352.9 |
|
|
|
6 |
% |
|
Non-GAAP gross margin percentage(1) |
|
|
82 |
% |
|
|
82 |
% |
|
|
|
|
|
(1) |
Non-GAAP financial measures are reconciled to GAAP results under Non-GAAP Financial Measures below. |
License gross margin decreased in Q1’22 compared to Q1’21 due to an $8.1 million decrease in license revenue, partially offset by a $3.5 million decrease in cost of license revenue.
Support and cloud services gross margin increased in Q1’22 compared to Q1’21 due to increases in subscription support and cloud revenue, partially offset by a decrease in perpetual support revenue, for a $28.2 million overall increase in support and cloud services revenue. This was partially offset by an increase of $7.5 million in cost of support and cloud services in Q1’22 compared to Q1’21.
Professional services gross margin increased in Q1’22 compared to Q1’21, primarily due to the impact of the COVID-19 pandemic on Q1’21 revenue, as well as a large fixed-price contract requiring a prior-year extension that impacted Q1’21 margins.
Operating Expenses
|
(Dollar amounts in millions) |
|
Three months ended |
|
|
|
|
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Percent Change |
|
|||
|
Sales and marketing |
|
$ |
125.5 |
|
|
$ |
124.7 |
|
|
|
1 |
% |
|
% of total revenue |
|
|
27 |
% |
|
|
29 |
% |
|
|
|
|
|
Research and development |
|
$ |
80.5 |
|
|
$ |
70.8 |
|
|
|
14 |
% |
|
% of total revenue |
|
|
18 |
% |
|
|
17 |
% |
|
|
|
|
|
General and administrative |
|
$ |
51.9 |
|
|
$ |
49.5 |
|
|
|
5 |
% |
|
% of total revenue |
|
|
11 |
% |
|
|
12 |
% |
|
|
|
|
|
Amortization of acquired intangible assets |
|
$ |
8.5 |
|
|
$ |
6.6 |
|
|
|
30 |
% |
|
% of total revenue |
|
|
2 |
% |
|
|
2 |
% |
|
|
|
|
|
Restructuring and other charges, net |
|
$ |
34.0 |
|
|
$ |
0.2 |
|
|
|
13662 |
% |
|
% of total revenue |
|
|
7 |
% |
|
|
0 |
% |
|
|
|
|
|
Total operating expenses |
|
$ |
300.4 |
|
|
$ |
251.9 |
|
|
|
19 |
% |
Headcount increased 1% between Q1’22 and Q1’21.
27
Operating expenses in Q1'22 compared to operating expenses in Q1'21 increased primarily due to the following:
|
|
• |
a $10 million increase in compensation expense (including benefit costs), primarily driven by: |
|
|
• |
a $5 million (5%) increase in salaries primarily due to the addition of $4 million in salary costs for Arena employees, |
|
|
• |
a $4 million (18%) increase in benefits, primarily related to higher health insurance costs, |
|
|
• |
a $1 million (87%) increase in travel due to reduced travel restrictions. |
|
|
• |
a $1 million (17%) increase in bonus expense due to higher attainment, |
|
|
• |
partially offset by a $2 million (4%) decrease in stock-based compensation expense. |
|
|
• |
a $34 million increase in restructuring charges primarily due to the restructuring plan initiated in the quarter. We expect to incur an additional $6 to $11 million of restructuring charges in the remainder of fiscal 2022. The anticipated cost savings resulting from the 2022 restructuring action are expected to help align our customer facing and product-related functions with the SaaS industry best practices and accelerate the opportunity for our on-premise customers to move to the cloud; |
|
|
• |
a $2 million (30%) increase in amortization expense due to the [acquisition of Arena]; |
|
|
• |
a $2 million (24%) increase in equipment subscriptions; |
|
|
• |
a $2 million (36%) increase in internal hosting costs; |
partially offset by:
|
|
• |
a $3 million decrease in acquisition-related charges. |
Interest Expense
|
(Dollar amounts in millions) |
|
Three months ended |
|
|
|
|
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Percent Change |
|
|||
|
Interest and debt premium expense |
|
$ |
(13.0 |
) |
|
$ |
(11.5 |
) |
|
|
13 |
% |
Interest expense includes interest on our credit facility and senior notes. We had $1.5 billion of total debt at the end of Q1’22, compared to $1.0 billion at the end of Q1’21. We borrowed $600 million under our credit facility to acquire Arena in Q2’21, $450 million of which remains outstanding. The average interest rate on borrowings outstanding was 3.2% during Q1’22, compared to 3.8% during Q1’21.
Other Income (Expense)
|
(Dollar amounts in millions) |
|
Three months ended |
|
|
|
|
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Percent Change |
|
|||
|
Interest income |
|
$ |
0.5 |
|
|
$ |
0.6 |
|
|
|
(15 |
)% |
|
Other income (expense), net |
|
|
5.7 |
|
|
|
(2.0 |
) |
|
|
(386 |
)% |
|
Other income (expense), net |
|
$ |
6.2 |
|
|
$ |
(1.4 |
) |
|
|
(538 |
)% |
28
The $7.6 million increase in other income (expense), net, for Q1’22 compared to Q1’21 is driven by a $9.8 million unrealized gain related to an equity investment in Matterport, Inc., calculated and recorded at the end of Q1’22, offset by foreign currency losses in the quarter. We sold our investment in Matterport near the end of January 2022 (in Q2’22) for an aggregate of $39.1 million and recognized a loss of $48.2 million.
Income Taxes
|
(Dollar amounts in millions) |
|
Three months ended |
|
|
|
|
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
|
Percent Change |
|
|||
|
Income before income taxes |
|
$ |
55.4 |
|
|
$ |
77.4 |
|
|
|
(28 |
)% |
|
Provision for income taxes |
|
$ |
9.3 |
|
|
$ |
53.9 |
|
|
|
(83 |
)% |
|
Effective income tax rate |
|
|
17 |
% |
|
|
70 |
% |
|
|
|
|
In Q1’22 and Q1’21, our effective tax rate differed from the statutory federal income tax rate of 21% due to U.S. tax reform, our corporate structure in which our foreign taxes are at a net effective tax rate lower than the U.S. rate and the excess tax benefit related to stock-based compensation. A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland and the Cayman Islands. In Q1’22 and Q1’21, the foreign rate differential predominantly relates to these earnings.
In Q1’22 and Q1’21, in addition to the foreign rate differential, the effective tax rate was impacted by the net effects of the Global Intangible Low-Taxed Income (GILTI) and Foreign Derived Intangible Income (FDII) regimes and the excess tax benefit related to stock-based compensation.
In Q1’21, our results also include a charge of $35.3 million related to the effects of an unrecognized tax benefit in the Republic of Korea (South Korea), primarily related to foreign withholding taxes, as well as the effects of the full valuation allowance which was maintained against our U.S. net deferred tax assets at that time.
Operating Measure
ARR
ARR (Annual Run Rate) represents the annualized value of our portfolio of active subscription software, cloud, SaaS, and support contracts as of the end of the reporting period. ARR includes orders placed under our Strategic Alliance Agreement with Rockwell Automation, including orders placed to satisfy contractual minimum commitments.
We believe ARR is a valuable operating metric to measure the health of a subscription business because it captures expected subscription and support cash generation from customers. Because this measure represents the annualized value of customer contracts as of a point in time, it does not represent revenue for any particular period or remaining revenue that will be recognized in future periods.
Non-GAAP Financial Measures
Our non-GAAP financial measures and the reasons we use them and the reasons we exclude the items identified below are described in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended September 30, 2021.
The non-GAAP financial measures presented in the discussion of our results of operations and the respective most directly comparable GAAP measures are:
|
|
• |
free cash flow—cash flow from operations |
|
|
• |
non-GAAP gross margin—GAAP gross margin |
|
|
• |
non-GAAP operating income—GAAP operating income |
|
|
• |
non-GAAP operating margin—GAAP operating margin |
|
|
• |
non-GAAP net income—GAAP net income |
|
|
• |
non-GAAP diluted earnings or loss per share—GAAP diluted earnings or loss per share |
29
Free cash flow is cash flow from operations net of capital expenditures, which are expenditures for property and equipment and consist primarily of facility improvements, office equipment, computer equipment, and software. We believe that free cash flow, in conjunction with cash from operations, is a useful measure of liquidity since capital expenditures are a necessary component of ongoing operations.
The non-GAAP financial measures other than free cash flow exclude, as applicable, stock-based compensation expense; amortization of acquired intangible assets; acquisition-related and other transactional charges included in general and administrative expenses; restructuring and other charges, net; non-operating charges (credits); and income tax adjustments as defined in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. In Q1’21, we incurred tax expense related to a reserve for a South Korean tax exposure established in the quarter which is excluded from our non-GAAP financial measures as it was related to prior periods and not included in management’s view of Q1’21 results for comparative purposes.
We use these non-GAAP financial measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our core operating results. We believe that these non-GAAP financial measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals (communicated internally and externally) for managing our business and evaluating our performance. We believe that providing non-GAAP financial measures also affords investors a view of our operating results that may be more easily compared to the results of other companies in our industry that use similar financial measures to supplement their GAAP results.
The items excluded from the non-GAAP financial measures often have a material impact on our financial results, certain of those items are recurring, and other such items often recur. Accordingly, the non-GAAP financial measures included in this Quarterly Report on Form 10-Q should be considered in addition to, and not as a substitute for or superior to, the comparable measures prepared in accordance with GAAP. The following tables reconcile each of these non-GAAP financial measures to its most closely comparable GAAP measure on our financial statements.
|
(in millions, except per share amounts) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
GAAP gross margin |
|
$ |
362.6 |
|
|
$ |
342.2 |
|
|
Stock-based compensation |
|
|
6.0 |
|
|
|
4.4 |
|
|
Amortization of acquired intangible assets included in cost of revenue |
|
|
6.5 |
|
|
|
6.3 |
|
|
Non-GAAP gross margin |
|
$ |
375.1 |
|
|
$ |
352.9 |
|
|
GAAP operating income |
|
$ |
62.2 |
|
|
$ |
90.3 |
|
|
Stock-based compensation |
|
|
45.9 |
|
|
|
46.1 |
|
|
Amortization of acquired intangible assets |
|
|
15.0 |
|
|
|
12.8 |
|
|
Acquisition-related and other transactional charges included in general and administrative expenses |
|
|
1.1 |
|
|
|
3.9 |
|
|
Restructuring and other charges, net |
|
|
34.0 |
|
|
|
0.2 |
|
|
Non-GAAP operating income |
|
$ |
158.1 |
|
|
$ |
153.4 |
|
|
GAAP net income |
|
$ |
46.1 |
|
|
$ |
23.5 |
|
|
Stock-based compensation |
|
|
45.9 |
|
|
|
46.1 |
|
|
Amortization of acquired intangible assets |
|
|
15.0 |
|
|
|
12.8 |
|
|
Acquisition-related and other transactional charges included in general and administrative expenses |
|
|
1.1 |
|
|
|
3.9 |
|
|
Restructuring and other charges, net |
|
|
34.0 |
|
|
|
0.2 |
|
|
Non-operating charges (credits) (1) |
|
|
(9.8 |
) |
|
|
0.0 |
|
|
Income tax adjustments (2) |
|
|
(19.2 |
) |
|
|
27.2 |
|
|
Non-GAAP net income |
|
$ |
113.1 |
|
|
$ |
113.7 |
|
|
GAAP diluted earnings per share |
|
$ |
0.39 |
|
|
$ |
0.20 |
|
|
Stock-based compensation |
|
|
0.39 |
|
|
|
0.39 |
|
|
Amortization of acquired intangible assets |
|
|
0.13 |
|
|
|
0.11 |
|
|
Acquisition-related and other transactional charges included in general and administrative expenses |
|
|
0.01 |
|
|
|
0.03 |
|
|
Restructuring and other charges, net |
|
|
0.29 |
|
|
|
— |
|
|
Non-operating charges (credits) (1) |
|
|
(0.08 |
) |
|
|
0.00 |
|
|
Income tax adjustments (2) |
|
|
(0.16 |
) |
|
|
0.23 |
|
|
Non-GAAP diluted earnings per share |
|
$ |
0.95 |
|
|
$ |
0.97 |
|
|
(1) |
In the first quarter of 2022, we recorded a $9.8 million gain on our equity investment in Matterport, Inc. |
|
(2) |
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 2021 we had recorded a full valuation allowance against our U.S. net deferred tax assets. As we were profitable on a non-GAAP basis, the 2021 tax provision was calculated assuming there was no valuation allowance. Additionally, our 2021 non-GAAP results excluded tax expense of $34.6 million related to a South Korean tax matter, primarily related to foreign withholding taxes. |
30
Operating margin impact of non-GAAP adjustments:
|
|
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
GAAP operating margin |
|
|
13.6 |
% |
|
|
21.1 |
% |
|
Stock-based compensation |
|
|
10.0 |
% |
|
|
10.7 |
% |
|
Amortization of acquired intangible assets |
|
|
3.3 |
% |
|
|
3.0 |
% |
|
Acquisition-related and other transactional charges included in general and administrative expenses |
|
|
0.2 |
% |
|
|
0.9 |
% |
|
Restructuring and other charges, net |
|
|
7.4 |
% |
|
|
0.1 |
% |
|
Non-GAAP operating margin |
|
|
34.5 |
% |
|
|
35.8 |
% |
Critical Accounting Policies and Estimates
The financial information included in Item 1 reflects no material changes in our critical accounting policies and estimates as set forth under the heading Critical Accounting Policies and Estimates in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2021 Annual Report on Form 10-K.
Recent Accounting Pronouncements
In accordance with recently issued accounting pronouncements, we will be required to comply with certain changes in accounting rules and regulations. Refer to Note 1. Basis of Presentation to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for all recently issued accounting pronouncements.
Liquidity and Capital Resources
|
(in millions) |
|
December 31, 2021 |
|
|
September 30, 2021 |
|
||
|
Cash and cash equivalents |
|
$ |
296.1 |
|
|
$ |
326.5 |
|
|
Restricted cash |
|
|
0.5 |
|
|
|
0.5 |
|
|
Total |
|
$ |
296.6 |
|
|
$ |
327.0 |
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Net cash provided by operating activities |
|
$ |
137.7 |
|
|
$ |
113.8 |
|
|
Net cash provided by investing activities |
|
$ |
2.7 |
|
|
$ |
46.7 |
|
|
Net cash used in financing activities |
|
$ |
(169.1 |
) |
|
$ |
(42.8 |
) |
Cash, Cash Equivalents and Restricted Cash
We invest our cash with highly rated financial institutions. Cash and cash equivalents include highly liquid investments with original maturities of three months or less.
31
A significant portion of our cash is generated and held outside the U.S. As of December 31, 2021, we had cash and cash equivalents of $55 million in the U.S., $75 million in Europe, $139 million in Asia Pacific (including India) and $27 million in other non-U.S. countries. We have substantial cash requirements in the U.S., but we believe that the combination of our existing U.S. cash and cash equivalents, our ability to repatriate cash to the U.S. more cost effectively with the recent U.S. tax law changes, future U.S. operating cash flows and cash available under our credit facility will be sufficient to meet our ongoing U.S. operating expenses and known capital requirements.
Cash Provided by Operating Activities
Cash provided by operating activities was $138 million in Q1’22, compared to $114 million in Q1’21. The increase in cash from operations in Q1’22 compared to Q1’21 was primarily driven by an increase in collections, offset by higher salary and salary-related payments. Cash from operations for Q1’22 includes $11 million of restructuring payments, compared to $7 million of restructuring payments in the year-ago period. Q1’21 cash from operations also included $3 million of acquisition-related payments.
Cash Provided by Investing Activities
|
(in millions) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Additions to property and equipment |
|
$ |
(3.4 |
) |
|
$ |
(2.9 |
) |
|
Proceeds from (purchases of) short- and long-term marketable securities, net |
|
|
— |
|
|
|
58.5 |
|
|
Settlement of net investment hedges |
|
|
6.5 |
|
|
|
(7.4 |
) |
|
Other |
|
|
(0.4 |
) |
|
|
(1.5 |
) |
|
Net cash provided by investing activities |
|
$ |
2.7 |
|
|
$ |
46.7 |
|
Cash provided by investing activities in Q1’22 reflects settlement of net investment hedges of $6.5 million. Cash provided in investing activities in Q1’21 reflects proceeds from the sale of marketable securities of $56 million.
Cash Used in Financing Activities
|
(in millions) |
|
Three months ended |
|
|||||
|
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Borrowings on debt, net |
|
$ |
— |
|
|
$ |
(18.0 |
) |
|
Repurchases of common stock |
|
|
(119.7 |
) |
|
|
— |
|
|
Payments of withholding taxes in connection with stock-based awards |
|
|
(49.2 |
) |
|
|
(24.5 |
) |
|
Payment of principal for financing leases |
|
|
(0.2 |
) |
|
|
(0.3 |
) |
|
Net cash used in financing activities |
|
$ |
(169.1 |
) |
|
$ |
(42.8 |
) |
Net cash outflows related to financing activities in Q1’22 include the repurchase of $120 million of common stock. We were committed to repurchasing an additional $5 million of common stock as of December 31, 2021, which settled in early January 2022 (Q2’22).
Outstanding Debt
|
(in millions) |
|
December 31, 2021 |
|
|
|
4.000% Senior notes due 2028 |
|
$ |
500.0 |
|
|
3.625% Senior notes due 2025 |
|
|
500.0 |
|
|
Credit facility revolver |
|
|
450.0 |
|
|
Total debt |
|
$ |
1,450.0 |
|
|
Unamortized debt issuance costs for the senior notes |
|
|
(10.0 |
) |
|
Total debt, net of issuance costs |
|
$ |
1,440.0 |
|
|
|
|
|
|
|
|
Undrawn under credit facility revolver |
|
$ |
550.0 |
|
|
Undrawn under credit facility revolver available to borrow |
|
$ |
534.7 |
|
32
As of December 31, 2021, we were in compliance with all financial and operating covenants of the credit facility and the note indentures. Any failure to comply with such covenants under the credit facility would prevent us from being able to borrow additional funds under the credit facility, and, as with any failure to comply with such covenants under the note indentures, could constitute a default that could cause all amounts outstanding to become due and payable immediately.
Our credit facility and our senior notes described in Note 13. Debt to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
Future Expectations
We believe that existing cash and cash equivalents, together with cash generated from operations and amounts available under the credit facility, will be sufficient to meet our working capital and capital expenditure requirements (which we expect to be approximately $30 million in FY’22) through at least the next twelve months and to meet our known long-term capital requirements. In FY’22 we expect to pay approximately $45 million to $50 million in restructuring cash payments related to our recently announced restructuring charge as well as previous restructuring charges.
Our expected uses and sources of cash could change, our cash position could be reduced, and we could incur additional debt obligations if we decide to retire debt, engage in strategic transactions, or repurchase shares, any of which could be commenced, suspended or completed at any time. Any such repurchases or retirement of debt will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any debt retirement or issuance, share repurchases, or strategic transactions may be material.
|
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
There have been no significant changes in our market risk exposure as described in Item 7A. Quantitative and Qualitative Disclosures about Market Risk of our 2021 Annual Report on Form 10-K.
|
ITEM 4. |
CONTROLS AND PROCEDURES |
Evaluation of Effectiveness of Disclosure Controls and Procedures
Our management maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), as appropriate, to allow for timely decisions regarding required disclosure.
We evaluated, under the supervision and with the participation of management, including our principal executive and principal financial officers, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a or 15(d) of the Exchange Act that occurred during the period ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
33
PART II—OTHER INFORMATION
|
ITEM 1. |
LEGAL PROCEEDINGS |
Information on legal proceedings can be found in Note 15. Commitments and Contingencies – Legal and Regulatory Matters – 401(k) Plan of Notes to Consolidated Financial Statements in this Form 10-Q, which information is incorporated herein by reference.
|
ITEM 1A. |
RISK FACTORS |
In addition to other information set forth in this report, you should carefully consider the risk factors described in Part I. Item 1A. Risk Factors in our 2021 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
|
ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
The table below shows the shares of our common stock we repurchased in the first quarter of 2022.
|
Period |
Total Number of Shares (or Units) Purchased |
|
Average Price Paid per Share (or Unit) |
|
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs |
|
Approximate Dollar Value of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1) |
|
||||
|
October 1, 2021 - October 31, 2021 |
|
— |
|
|
— |
|
|
— |
|
$ |
970,000,047 |
|
|
November 1, 2021 - November 30, 2021 |
|
— |
|
|
— |
|
|
— |
|
$ |
970,000,047 |
|
|
December 1, 2021- December 31, 2021 |
|
1,003,420 |
|
$ |
119.33 |
|
|
1,003,420 |
|
$ |
850,260,561 |
|
|
Total |
|
1,003,420 |
|
$ |
119.33 |
|
|
1,003,420 |
|
$ |
850,260,561 |
|
|
|
(1) |
Our Board of Directors has authorized us to repurchase up to $1 billion of our common stock in the period November 13, 2020 through September 30, 2023, which program we announced on December 15, 2020. |
34
|
ITEM 6. |
EXHIBITS |
|
3.1 |
|
|
|
|
|
|
|
3.2.1 |
|
|
|
|
|
|
|
3.2.2 |
|
|
|
4.1 |
|
|
|
|
|
|
|
4.2 |
|
|
|
|
|
|
|
4.3 |
|
|
|
|
|
|
|
31.1 |
|
Certification of the Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a). |
|
|
|
|
|
31.2 |
|
Certification of the Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a). |
|
|
|
|
|
32* |
|
Certification of Periodic Financial Report Pursuant to 18 U.S.C. Section 1350. |
|
|
|
|
|
101 |
|
The following materials from PTC Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2021 ("Q1 Form 10-Q") formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of December 31, 2021 and September 30, 2021; (ii) Condensed Consolidated Statements of Operations for the three months ended December 31, 2021 and December 31, 2020; (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended December 31, 2021 and December 31, 2020; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2021 and December 31, 2020; (v) Consolidated Statements of Stockholders’ Equity for the three months ended December 31, 2021 and December 31, 2020; and (vi) Notes to Condensed Consolidated Financial Statements. |
|
|
|
|
|
104 |
|
The cover page of this Q1'22 Form 10-Q formatted in Inline XBRL (included in Exhibit 101). |
|
* |
Indicates that the exhibit is being furnished, not filed, with this report. |
35
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
PTC Inc. |
|||
|
|
|
|
|
|
|
|
By: |
|
/S/ KRISTIAN TALVITIE |
|
|
|
|
|
Kristian Talvitie Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
|
Date: February 4, 2022
36
CERTIFICATION
I, James Heppelmann, certify that:
1. I have reviewed this quarterly report on Form 10-Q of PTC Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: |
February 4, 2022 |
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/S/ JAMES HEPPELMANN |
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James Heppelmann |
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President and Chief Executive Officer |
CERTIFICATION
I, Kristian Talvitie, certify that:
1. I have reviewed this quarterly report on Form 10-Q of PTC Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: |
February 4, 2022 |
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/S/ KRISTIAN TALVITIE |
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Kristian Talvitie |
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Executive Vice President and Chief Financial Officer |
Certification of Periodic Financial Report
Pursuant to 18 U.S.C. Section 1350
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of PTC Inc. (the “Company”) certifies that, to his knowledge, the Quarterly Report on Form 10-Q of the Company for the quarter ended December 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: |
February 4, 2022 |
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/S/ JAMES HEPPELMANN |
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James Heppelmann President and Chief Executive Officer |
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Date: |
February 4, 2022 |
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/S/ KRISTIAN TALVITIE |
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Kristian Talvitie |
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Executive Vice President and Chief Financial Officer |
Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Current assets: | ||
| Allowance for doubtful accounts | $ 295 | $ 304 |
| Stockholders’ equity: | ||
| Preferred stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
| Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
| Preferred stock, shares issued | 0 | 0 |
| Common stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 500,000,000 | 500,000,000 |
| Common stock, shares issued | 116,870,000 | 117,163,000 |
| Common stock, shares outstanding | 116,870,000 | 117,163,000 |
Consolidated Statements Of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
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| Statement Of Income And Comprehensive Income [Abstract] | ||
| Net income | $ 46,089 | $ 23,515 |
| Other comprehensive income (loss), net of tax: | ||
| Hedge gain (loss) arising during the period, net of tax of $0.8 million and $0 million in the first quarter of 2022 and 2021, respectively | 2,495 | (6,779) |
| Foreign currency translation adjustment, net of tax of $0 for each period | (5,668) | 19,975 |
| Unrealized gain (loss) on marketable securities, net of tax of $0 for each period | 0 | (307) |
| Amortization of net actuarial pension loss included in net income, net of tax of $0.1 million and $0.3 million in the first quarter of 2022 and 2021, respectively | 265 | 732 |
| Change in unamortized pension gain (loss) during the period related to changes in foreign currency | 385 | (1,112) |
| Other comprehensive income (loss) | (2,523) | 12,509 |
| Comprehensive income | $ 43,566 | $ 36,024 |
Consolidated Statements Of Comprehensive Income (Parenthetical) - USD ($) |
3 Months Ended | |
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Dec. 31, 2021 |
Dec. 31, 2020 |
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| Statement Of Income And Comprehensive Income [Abstract] | ||
| Hedge gain (loss) arising during the period, tax | $ 800,000 | $ 0 |
| Foreign currency translation adjustment, tax | 0 | 0 |
| Unrealized gain (loss) on marketable securities, tax | 0 | 0 |
| Amortization of net actuarial pension loss included in net income, tax | $ 100,000 | $ 300,000 |
Basis of Presentation |
3 Months Ended |
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Dec. 31, 2021 | |
| Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
| Basis of Presentation |
1. Basis of Presentation General The accompanying unaudited condensed consolidated financial statements include the accounts of PTC Inc. and its wholly owned subsidiaries and have been prepared by management in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and in accordance with the rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. While we believe that the disclosures presented are adequate in order to make the information not misleading, these unaudited quarterly financial statements should be read in conjunction with our annual consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair statement of our financial position, results of operations and cash flows at the dates and for the periods indicated. The September 30, 2021 Consolidated Balance Sheet included herein is derived from our audited consolidated financial statements. Unless otherwise indicated, all references to a year mean our fiscal year, which ends on September 30. Risks and Uncertainties - COVID-19 Pandemic The COVID-19 pandemic that began in early 2020 continues to significantly affect global economic activity and create macroeconomic uncertainty. We assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to us and the unknown future impacts of the COVID-19 pandemic as of December 31, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to, our allowance for doubtful accounts, stock-based compensation, the carrying value of our goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition. While our assessment did not result in a material impact to our consolidated financial statements as of and for the quarter ended December 31, 2021, our future assessment could result in material impacts to our consolidated financial statements in future reporting periods. Recently Adopted Accounting Pronouncements Income Taxes In December 2019, the FASB issued Accounting Standards Update ASU 2019-12, Income Taxes (Topic 740) on Simplifying the Accounting for Income Taxes. The decisions reflected in ASU 2019-12 update specific areas of ASC 740, Income Taxes, to reduce complexity while maintaining or improving the usefulness of the information provided to users of financial statements. The new standard became effective for us in this first quarter of 2022 ending December 31, 2021 and did not have a material impact on our consolidated financial statements. Pending Accounting Pronouncements Reference Rate Reform In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. ASU 2020-04 is effective for all entities upon issuance through December 31, 2022. We are still evaluating the impact, but do not expect the standard to have a material impact on our consolidated financial statements. Business Combinations In October 2021, the FASB issued Accounting Standards Update ASU 2021-08, Business Combinations (Topic 805) on Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to 1) recognition of an acquired contract asset and liability, and 2) payment terms and their effect on subsequent revenue recognized by the acquirer. ASU 2021-08 will be effective for us in the first quarter of 2024, though early adoption of the standard is permitted. We are currently evaluating the impact the standard will have on our consolidated financial statements, but at this time we do not expect it to be material for prior acquisitions. The impact in future periods will depend on the contract assets and contract liabilities acquired in future business combinations. |
Revenue from Contracts with Customers |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue From Contract With Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue from Contracts with Customers |
2. Revenue from Contracts with Customers Contract Assets and Contract Liabilities
As of December 31, 2021, $8.4 million of our contract assets are expected to be transferred to receivables within the next 12 months and therefore are included in other current assets. The remainder is included in other long-term assets and expected to be transferred within the next 24 months. Approximately $5.1 million of the September 30, 2021 contract asset balance was transferred to receivables during the three months ended December 31, 2021 as a result of the right to payment becoming unconditional. Additions to contract assets of approximately $5.4 million related to revenue recognized in the period, net of billings. The majority of the contract asset balance relates to two large professional services contracts with invoicing terms based on performance milestones. There were no impairments of contract assets during the three months ended December 31, 2021. During the three months ended December 31, 2021, we recognized $222.0 million of revenue that was included in deferred revenue as of September 30, 2021 and there were additional deferrals of $205.4 million, primarily related to new billings. For subscription contracts, we generally invoice customers annually. The balance of total short- and long-term receivables as of December 31, 2021 was $683.8 million, compared to total short- and long-term receivables as of September 30, 2021 of $744.6 million. Our multi-year, non-cancellable on-premises subscription contracts provide customers with an annual right to exchange software within the subscription with other software. As of December 31, 2021 and September 30, 2021, the total refund liability was $40.1 million and $40.3 million, respectively, primarily associated with the annual right to exchange on-premises subscription software. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. In determining the adequacy of the allowance for doubtful accounts, management specifically analyzes individual accounts receivable, historical bad debts, customer concentrations, customer credit-worthiness, current economic conditions, and accounts receivable aging trends. Our allowance for doubtful accounts on trade accounts receivable was $0.3 million as of December 31, 2021 and September 30, 2021. Uncollectible trade accounts receivable written-off and bad debt expense were immaterial in the first quarter ended December 31, 2021 and December 31, 2020. Costs to Obtain or Fulfill a Contract We recognize an asset for the incremental costs of obtaining a contract with a customer if the benefit of those costs is expected to be longer than one year. These deferred costs primarily related to commissions. As of December 31, 2021 and September 30, 2021, deferred costs of $41.6 million and $40.2 million, respectively, are included in other current assets and $80.7 million and $81.1 million, respectively, are included in other assets (non-current). Amortization expense related to costs to obtain a contract with a customer was $11.6 million and $10.4 million in the three months ended December 31, 2021and December 31, 2020, respectively. There were no impairments of the contract cost asset in the three months ended December 31, 2021 and December 31, 2020. Remaining Performance Obligations Our contracts with customers include amounts allocated to performance obligations that will be satisfied at a later date. As of December 31, 2021, the amounts include additional performance obligations of $481.1 million recorded in deferred revenue and $1,140.3 million that are not yet recorded in the Consolidated Balance Sheets. We expect to recognize approximately 83% of the total $1,621.4 million over the next 24 months, with the remaining amount thereafter. Disaggregation of Revenue
For further disaggregation of revenue by geographic region and product group see Note 11. Segment and Geographic Information. |
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Restructuring and Other Charges |
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| Restructuring and Other Charges |
3. Restructuring and Other Charges Restructuring and other charges, net includes restructuring charges (credits) and impairment and accretion expense charges related to the lease assets of exited facilities. Refer to Note 14. Leases for additional information about exited facilities. In the three months ended December 31, 2021, restructuring and other charges, net totaled $34.0 million, of which $34.1 million is attributable to restructuring charges, offset by $0.1 million attributable to sublease income related to exited lease facilities. We made cash payments related to restructuring charges of $9.8 million ($9.1 million related to the 2022 restructuring described below and $0.7 million in payments for facilities restructured in prior period). In the three months ended December 31, 2020, restructuring and other charges, net totaled $0.2 million, of which $0.1 million is attributable to restructuring charges and $0.1 million is related to exited facilities. Restructuring Charges In the first quarter of 2022, we committed to a plan to restructure our workforce and consolidate select facilities to align our customer facing and product-related functions with the SaaS industry best practices and accelerate the opportunity for our on-premise customers to move to the cloud. The restructuring plan resulted in charges of $34.1 million in the first quarter of 2022 primarily associated with approximately 340 employees, in addition to the $1.7 million of professional fees recorded in the fourth quarter of 2021 in connection with the re-organization. We are anticipating total restructuring charges for this plan to be approximately $40 million to $45 million. In the first quarter of 2020, we initiated a restructuring program as part of a realignment associated with expected synergies and operational efficiencies related to the Onshape acquisition. The restructuring plan resulted in charges of $30.8 million through fiscal year 2020 for termination benefits associated with approximately 250 employees. During the three months ended December 31, 2021 and December 31, 2020 we incurred charges of $0.1 million and $0.2 million, respectively, in connection with this restructuring plan. The following table summarizes restructuring accrual activity for the three months ended December 31, 2021:
The following table summarizes restructuring accrual activity for the three months ended December 31, 2020:
The accrual for employee severance and related benefits is included in accrued compensation and benefits in the Consolidated Balance Sheets. The accrual for facility closures and related costs is included in accrued expenses and other current liabilities in the Consolidated Balance Sheets. |
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Stock-based Compensation |
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| Share Based Compensation Allocation And Classification In Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation |
4. Stock-based Compensation Our equity incentive plan provides for grants of nonqualified and incentive stock options, common stock, restricted stock, restricted stock units (RSUs) and stock appreciation rights to employees, directors, officers and consultants. We award RSUs as our principal equity incentive awards. The following table shows RSU activity for the three months ended December 31, 2021:
The weighted-average fair value of the TSR RSUs was $136.43 per target RSU on the grant date. The fair value of the TSR RSUs was determined using a Monte Carlo simulation model. The significant assumptions used in the Monte Carlo simulation model were as follows:
Compensation expense recorded for our stock-based awards is classified in our Consolidated Statements of Operations as follows:
Stock-based compensation expense includes $2.0 million in the first quarter of 2022 and $1.9 million in the first quarter of 2021 related to our employee stock purchase plan. |
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Earnings per Share (EPS) and Common Stock |
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| Earnings per Share (EPS) and Common Stock |
5. Earnings per Share (EPS) and Common Stock EPS The following table presents the calculation for both basic and diluted EPS:
There were no anti-dilutive shares for the three months ended December 31, 2021. There were 0.1 million anti-dilutive shares for the three months ended December 31, 2020. Common Stock Repurchases Our Articles of Organization authorize us to issue up to 500 million shares of our common stock. Our Board of Directors has authorized us to repurchase up to $1 billion of our common stock in the period October 1, 2020 through September 30, 2023. In the three months ended December 31, 2021, we repurchased 1,003 thousand shares for $119.7 million. We additionally entered into trades to purchase an incremental 43 thousand shares for $5.2 million, which will be settled in January 2022 and is included in accrued expenses and other current liabilities as of December 31, 2021. We did not repurchase any shares in the first quarter of 2021. All shares of our common stock repurchased are automatically restored to the status of authorized and unissued. |
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Acquisitions |
3 Months Ended |
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Dec. 31, 2021 | |
| Business Combinations [Abstract] | |
| Acquisitions |
6. Acquisitions Acquisition-related costs in the first quarter of 2022 totaled $1.0 million, compared to $3.9 million in the first quarter of 2021. These costs are classified in general and administrative expenses in the accompanying Consolidated Statements of Operations. Acquisition-related costs include direct costs of potential and completed acquisitions (e.g., investment banker fees and professional fees, including legal and valuation services) and expenses related to acquisition integration activities (e.g., professional fees and severance). In addition, subsequent adjustments to our initial estimated amount of contingent consideration associated with specific acquisitions are included within acquisition-related charges. Our results of operations include the results of acquired businesses beginning on their respective acquisition date. Our results of operations for the reported periods, if presented on a pro forma basis, would not differ materially from our reported results. Arena On January 15, 2021, we acquired Arena Holdings, Inc. (“Arena”) pursuant to the Agreement and Plan of Merger dated as of December 12, 2020 by and among PTC, Arena, Astronauts Merger Sub, Inc., and the Representative named therein, the material terms of which are described in the Form 8-K filed by PTC on December 14, 2020 and which is filed as Exhibit 1.1 to that Form 8-K. PTC paid approximately $715 million, net of cash acquired of $11.1 million, for Arena, which amount was financed with cash on hand and $600 million borrowed under our existing credit facility. Arena had approximately 170 employees on the close date. The acquisition of Arena added revenue of approximately $29.8 million in FY’21, which is net of approximately $9.1 million in fair value adjustments related to purchase accounting for the acquisition. The acquisition of Arena has been accounted for as a business combination. Assets acquired and liabilities assumed have been recorded at their estimated fair values as of the acquisition date. The fair values of intangible assets were based on valuations using a discounted cash flow model which requires the use of significant estimates and assumptions, including estimating future revenues and costs. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. The purchase price allocation resulted in $562.8 million of goodwill, $155.0 million of customer relationships, $38.3 million of purchased software, $4.2 million of trademarks, $41.3 million of deferred tax liabilities, $15.5 million of deferred revenue, $11.4 million of accounts receivable, and $0.4 million of other net liabilities. The acquired customer relationships, purchased software, and trademarks are being amortized over useful lives of 13 years, 9 years, and 12 years, respectively, based on the expected economic benefit pattern of the assets. The acquired goodwill was allocated to our software products segment and will not be deductible for income tax purposes. The resulting amount of goodwill reflects the expected value that will be created by participation in expected future growth of the PLM SaaS market and expansion into the mid-market for PLM, where SaaS solutions are becoming the standard. |
Goodwill and Intangible Assets |
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| Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets |
7. Goodwill and Intangible Assets We have two operating and reportable segments: (1) Software Products and (2) Professional Services. We assess goodwill for impairment at the reporting unit level. Our reporting units are determined based on the components of our operating segments that constitute a business for which discrete financial information is available and for which operating results are regularly reviewed by segment management. Our reporting units are the same as our operating segments. As of December 31, 2021, goodwill and acquired intangible assets in the aggregate attributable to our Software Products segment was $2,508.8 million and attributable to our Professional Services segment was $45.0 million. As of September 30, 2021, goodwill and acquired intangible assets in the aggregate attributable to our Software Products segment was $2,525.7 million and attributable to our Professional Services segment was $45.2 million. Acquired intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We evaluate goodwill for impairment in the third quarter of our fiscal year, or on an interim basis if an event occurs or circumstances change that would, more likely than not, reduce the fair value of a reporting segment below its carrying value. Factors we consider important, on an overall company basis and segment basis, when applicable, that could trigger an impairment review include significant under-performance relative to historical or projected future operating results, significant changes in our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, a significant decline in our stock price for a sustained period and a reduction of our market capitalization relative to net book value. We completed our annual goodwill impairment review as of June 30, 2021, based on a qualitative assessment. Our qualitative assessment included company-specific (e.g., financial performance and long-range plans), industry, and macroeconomic factors, as well as consideration of the fair value of each reporting unit relative to its carrying value at the last valuation date (June 27, 2020). Based on our qualitative assessment, we believe it is more likely than not that the fair values of our reporting units exceed their carrying values and no further impairment testing is required. Through December 31, 2021, there were no events or changes in circumstances that indicated that the carrying values of goodwill or acquired intangible assets may not be recoverable.
Goodwill and acquired intangible assets consisted of the following:
Goodwill Changes in goodwill presented by reportable segments were as follows:
Amortization of Intangible Assets The aggregate amortization expense for intangible assets with finite lives is classified in our Consolidated Statements of Operations as follows:
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Fair Value Measurements |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements |
8. Fair Value Measurements Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and consider assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. GAAP prescribes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value:
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Time deposits and corporate notes/bonds are classified within Level 1 of the fair value hierarchy because they are valued based on quoted market prices in active markets. The principal market in which we execute our foreign currency derivatives is the institutional market in an over-the-counter environment with a relatively high level of price transparency. The market participants usually are large financial institutions. Our foreign currency derivatives’ valuation inputs are based on quoted prices and quoted pricing intervals from public data sources and do not involve management judgment. These contracts are typically classified within Level 2 of the fair value hierarchy. Our significant financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and September 30, 2021 were as follows:
(1) Money market funds and time deposits. Level 3 Investments Convertible Note In the fourth quarter of 2021, we invested $2.0 million into a non-marketable convertible note. This debt security is classified as available-for-sale and is included in other assets on the Consolidated Balance Sheet. Non-Marketable Equity Investments The carrying value of our non-marketable equity investments is recorded in other assets on the Consolidated Balance Sheets and totaled $2.2 million for the periods ended December 31, 2021 and September 30, 2021.
Equity Securities As of December 31, 2021, we owned 4,316,301 common shares of Matterport, Inc., which are restricted from being able to be sold until January 2022 (six months after Matterport, Inc. became a public company). As a result of the limitations on the ability to sell, the equity securities are classified as a Level 3 financial instrument with fair value determined using the closing price of Matterport’s common stock on the Nasdaq stock market as of December 31, 2021, less a temporary discount for lack of marketability that will expire in January 2022. The discount for lack of marketability is calculated using a put-option model which includes observable and unobservable inputs. As of December 31, 2021, the investment is recorded at a fair value of $87.3 million in other current assets on the Consolidated Balance Sheets. For the three months ended December 31, 2021, we recognized a gain of $9.8 million related to the shares in other income, net on the Consolidated Statements of Operations. The following table provides a summary of changes in the fair value of our Level 3 investment in the Matterport, Inc. shares:
(1) The restriction on our ability to sell our shares lapsed in January 2022. Refer to Note 16. Subsequent Events for discussion regarding the expirations on the restriction and our subsequent sale of the Equity Securities in January 2022. |
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Marketable Securities |
3 Months Ended |
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Dec. 31, 2021 | |
| Marketable Securities [Abstract] | |
| Marketable Securities |
9. Marketable Securities We did not hold any marketable securities as of September 30, 2021 or December 31, 2021. In December 2020, we sold our remaining marketable securities to partially fund the Arena acquisition, resulting in proceeds of $56.2 million. Neither gross realized gains nor gross realized losses related to the sale were material.
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Derivative Financial Instruments |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Derivative Instruments And Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Financial Instruments |
10. Derivative Financial Instruments We enter into derivative transactions, specifically foreign currency forward contracts and options, to manage our exposure to foreign currency exchange risk in order to reduce earnings volatility. We do not enter into derivative transactions for trading or speculative purposes. The following table shows our derivative instruments measured at gross fair value as reflected in the Consolidated Balance Sheets:
Non-Designated Hedges We hedge our net foreign currency monetary assets and liabilities primarily resulting from foreign currency denominated receivables and payables with foreign exchange forward contracts to reduce the risk that our earnings and cash flows will be adversely affected by changes in foreign currency exchange rates. These contracts have maturities of up to approximately three months. Generally, we do not designate these foreign currency forward contracts as hedges for accounting purposes and changes in the fair value of these instruments are recognized immediately in earnings. Because we enter into forward contracts only as an economic hedge, any gain or loss on the underlying foreign-denominated balance would be offset by the loss or gain on the forward contract. Gains and losses on forward contracts and foreign denominated receivables and payables are included in other income (expense), net. We hedge our forecasted U.S. Dollar cash flows with foreign exchange options to reduce the risk that they will be adversely affected by changes in Euro or Japanese Yen exchange rates. These contracts have maturities of up to approximately ten months. We do not designate these foreign currency options as hedges for accounting purposes and changes in the fair value of these instruments are recognized immediately in earnings. Because we enter into options as an economic hedge, currency impacts on the Euro or Japanese Yen-denominated operations as compared to the forecasted plan rate may be partially offset by the gain on the put option. Gain on put options are included in other income (expense), net. As of December 31, 2021 and September 30, 2021, we had outstanding forward contracts and options with notional amounts equivalent to the following:
The following table shows the effect of our non-designated hedges in the Consolidated Statements of Operations for the three months ended December 31, 2021 and December 31, 2020:
In the three months ended December 31, 2021, foreign currency losses, net were $4.4 million. In the three months ended December 31, 2020, foreign currency losses, net were $1.8 million. Net Investment Hedges We translate balance sheet accounts of subsidiaries with foreign functional currencies into the U.S. Dollar using the exchange rate at each balance sheet date. Resulting translation adjustments are reported as a component of accumulated other comprehensive loss on the Consolidated Balance Sheets. We designate certain foreign exchange forward contracts as net investment hedges against exposure on translation of balance sheet accounts of Euro functional subsidiaries. Net investment hedges partially offset the impact of foreign currency translation adjustment recorded in accumulated other comprehensive loss on the Consolidated Balance Sheets. All foreign exchange forward contracts are carried at fair value on the Consolidated Balance Sheets and the maximum duration of net investment hedge foreign exchange forward contracts is approximately three months. Net investment hedge relationships are designated at inception, and effectiveness is assessed retrospectively on a quarterly basis using the net equity position of Euro functional subsidiaries. As the forward contracts are highly effective in offsetting exchange rate exposure, we record changes in these net investment hedges in accumulated other comprehensive loss and subsequently reclassify them to foreign currency translation adjustment in accumulated other comprehensive loss at the time of forward contract maturity. Changes in the fair value of foreign exchange forward contracts due to changes in time value are excluded from the assessment of effectiveness. Our derivatives are not subject to any credit contingent features. We manage credit risk with counterparties by trading among several counterparties and we review our counterparties’ credit at least quarterly. As of December 31, 2021 and September 30, 2021, we had outstanding forward contracts designated as net investment hedges with notional amounts equivalent to the following:
The following table shows the effect of our derivative instruments designated as net investment hedges in the Consolidated Statements of Operations for the three months ended December 31, 2021 and December 31, 2020:
As of December 31, 2021, we estimate that all amounts reported in accumulated other comprehensive loss will be applied against exposed balance sheet accounts upon translation within the next three months. Offsetting Derivative Assets and Liabilities We have entered into master netting arrangements for our forward contracts that allow net settlements under certain conditions. Although netting is permitted, it is currently our policy and practice to record all derivative assets and liabilities on a gross basis in the Consolidated Balance Sheets. The following table sets forth the offsetting of derivative assets as of December 31, 2021:
The following table sets forth the offsetting of derivative liabilities as of December 31, 2021:
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Segment and Geographic Information |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment and Geographic Information |
11. Segment and Geographic Information We operate within a single industry segment – computer software and related services. Operating segments as defined under GAAP are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our President and Chief Executive Officer. We have two operating and reportable segments: (1) Software Products, which includes license, subscription and related support revenue (including updates and technical support) for all our products; and (2) Professional Services, which includes consulting, implementation and training services. We do not allocate sales and marketing or general and administrative expense to our operating segments as these activities are managed on a consolidated basis. Additionally, segment profit does not include stock-based compensation, amortization of intangible assets, restructuring charges and certain other identified costs that we do not allocate to the segments for purposes of evaluating their operational performance. The revenue and profit attributable to our operating segments are summarized below. We do not produce asset information by reportable segment; therefore, it is not reported.
Our international revenue is presented based on the location of our customer. Revenue for the geographic regions in which we operate is presented below.
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Income Taxes |
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes |
12. Income Taxes
In the first quarter of 2022 and 2021, our effective tax rate differed from the statutory federal income tax rate of 21% due to our corporate structure in which our foreign taxes are at a net effective tax rate lower than the U.S. rate. A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland and the Cayman Islands. In 2022 and 2021, the foreign rate differential predominantly relates to these earnings. In 2022 and 2021, in addition to the foreign rate differential, the effective tax rate was impacted by the net effects of the Global Intangible Low-Taxed Income (GILTI) and Foreign Derived Intangible Income (FDII) regimes and the excess tax benefit related to stock-based compensation. In the first quarter of 2021, our results also include a charge of $35.3 million related to the effects of an unrecognized tax benefit in the Republic of Korea (South Korea), primarily related to foreign withholding taxes, as well as the effects of the full valuation allowance which was maintained against our U.S. net deferred tax assets at that time. We reassess our valuation allowance requirements each financial reporting period. We assess available positive and negative evidence to estimate whether sufficient future taxable income will be generated to use our existing deferred tax assets. In the assessment for the period ended September 30, 2021, we concluded it was more likely than not that our deferred tax assets related to United States federal and state income would be realizable, and therefore, the United States federal and the majority of the state valuation allowances were released in the fourth quarter of 2021. In the first quarter of 2022, we continue to maintain this conclusion. In the normal course of business, PTC and its subsidiaries are examined by various taxing authorities, including the Internal Revenue Service in the U.S. We regularly assess the likelihood of additional assessments by tax authorities and provide for these matters as appropriate. We are currently under audit by tax authorities in several jurisdictions. Audits by tax authorities typically involve examination of the deductibility of certain permanent items, limitations on net operating losses and tax credits. As of December 31, 2021 and September 30, 2021, we had unrecognized tax benefits of $21.8 million and $21.2 million, respectively. If all our unrecognized tax benefits as of December 31, 2021 were to become recognizable in the future, we would record a benefit to the income tax provision of $21.8 million, which would be partially offset by an increase in the U.S. valuation allowance of $4.7 million. Although we believe our tax estimates are appropriate, the final determination of tax audits and any related litigation could result in favorable or unfavorable changes in our estimates. We believe it is reasonably possible that within the next 12 months the amount of unrecognized tax benefits related to the resolution of multi-jurisdictional tax positions could be reduced by up to $1 million. |
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Debt |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt |
13. Debt At December 31, 2021 and September 30, 2021, we had the following long-term debt obligations:
Senior Unsecured Notes In February 2020, we issued $500 million in aggregate principal amount of 4.0% senior, unsecured long-term debt at par value, due in 2028 (the 2028 notes) and $500 million in aggregate principal amount of 3.625% senior, unsecured long-term debt at par value, due in 2025 (the 2025 notes). As of December 31, 2021, the total estimated fair value of the 2028 and 2025 notes was approximately $513.0 million and $508.0 million, respectively, based on quoted prices for the notes on that date. We were in compliance with all the covenants for all of our senior notes as of December 31, 2021. Terms of the 2028 and 2025 Notes Interest on the 2028 and 2025 notes is payable semi-annually on February 15 and August 15. The debt indenture for the 2028 and 2025 notes includes covenants that limit our ability to, among other things, incur additional debt, grant liens on our properties or capital stock, enter into sale and leaseback transactions or asset sales, and make capital distributions. We may, on one or more occasions, redeem the 2028 and 2025 notes in whole or in part at specified redemption prices. In certain circumstances constituting a change of control, we will be required to make an offer to repurchase the notes at a purchase price equal to 101% of the aggregate principal amount of the notes, plus accrued and unpaid interest. Our ability to repurchase the notes upon such event may be limited by law, by the indenture associated with the notes, by our then-available financial resources or by the terms of other agreements to which we may be party at such time. If we fail to repurchase the notes as required by the indenture, it would constitute an event of default under the indenture which, in turn, may also constitute an event of default under other obligations. Credit Agreement In February 2020, we entered into a Third Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as Administrative Agent, for a new secured multi-currency bank credit facility with a syndicate of banks. We expect to use the new credit facility for general corporate purposes, including acquisitions of businesses, share repurchases and working capital requirements. The credit facility consists of a $1 billion revolving credit facility, which may be increased by up to an additional $500 million in the aggregate if the existing or additional lenders are willing to make such increased commitments. The maturity date of the credit facility is February 13, 2025, when all remaining amounts outstanding will be due and payable. The revolving loan commitment does not require amortization of principal and may be repaid in whole or in part prior to the scheduled maturity date at our option without penalty or premium. As of December 31, 2021, the fair value of our credit facility approximates its book value. PTC and certain eligible foreign subsidiaries are eligible borrowers under the credit facility. Any borrowings by PTC Inc. under the credit facility would be guaranteed by PTC Inc.’s material domestic subsidiaries that become parties to the subsidiary guaranty, if any. As of the filing of this Form 10-Q, there are no subsidiary guarantors of the obligations under the credit facility. Any borrowings by eligible foreign subsidiary borrowers would be guaranteed by PTC Inc. and any subsidiary guarantors. As of the filing of this Form 10-Q, no funds were borrowed by an eligible foreign subsidiary borrower. In addition, owned property (including equity interests) of PTC and certain of its material domestic subsidiaries' owned property is subject to first priority perfected liens in favor of the lenders under this credit facility. 100% of the voting equity interests of certain of PTC’s domestic subsidiaries and 65% of its material first-tier foreign subsidiaries are pledged as collateral for the obligations under the credit facility. Loans under the credit facility bear interest at variable rates which reset every 30 to 180 days depending on the rate and period selected by PTC as described below. As of December 31, 2021, the annual rate for borrowing outstanding was 1.69%. Interest rates on borrowings outstanding under the credit facility range from 1.25% to 1.75% above an adjusted LIBO rate (or an agreed successor rate) for Euro currency borrowings or range from 0.25% to 0.75% above the defined base rate (the greater of the Prime Rate, the NYFRB rate plus 0.5%, or an adjusted LIBO rate plus 1%) for base rate borrowings, in each case based upon PTC’s total leverage ratio. A quarterly commitment fee on the undrawn portion of the credit facility is required, ranging from 0.175% to 0.30% per annum based upon PTC’s total leverage ratio. The credit facility limits PTC’s and its subsidiaries’ ability to, among other things: incur additional indebtedness, incur liens or guarantee obligations; pay dividends (other than to PTC) and make other distributions; make investments and enter into joint ventures; dispose of assets; and engage in transactions with affiliates, except on an arms-length basis. Under the credit facility, PTC and its material domestic subsidiaries may not invest cash or property in, or loan to, PTC’s foreign subsidiaries in aggregate amounts exceeding $100 million for any purpose and an additional $200 million for acquisitions of businesses. In addition, under the credit facility, PTC and its subsidiaries must maintain the following financial ratios:
As of December 31, 2021, our total leverage ratio was 2.23 to 1.00, our senior secured leverage ratio was 0.71 to 1.00 and our interest coverage ratio was 14.02 to 1.00 and we were in compliance with all financial and operating covenants of the credit facility. Any failure to comply with the financial or operating covenants of the credit facility would prevent PTC from being able to borrow additional funds, and would constitute a default, permitting the lenders to, among other things, accelerate the amounts outstanding, including all accrued interest and unpaid fees, under the credit facility and to terminate the credit facility. A change in control of PTC, as defined in the agreement, also constitutes an event of default, permitting the lenders to accelerate the indebtedness and terminate the credit facility. In the first quarter of 2022 and 2021, we paid $2.4 million and $0.7 million of interest on our debt, respectively. The average interest rate on borrowings outstanding during the first quarter of 2022 and 2021 was approximately 3.2% and 3.8%, respectively. |
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Leases |
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases |
14. Leases Our operating leases expire at various dates through 2037 and are primarily for office space, cars, servers, and office equipment. Our headquarters are located at 121 Seaport Boulevard, Boston, Massachusetts. In February 2019, we subleased a portion of our headquarters through June 30, 2022. We will receive approximately $9.1 million in sublease income over the term of the sublease. The components of lease cost reflected in the Consolidated Statement of Operations for the three months ended December 31, 2021 and December 31, 2020 were as follows:
Supplemental cash flow and right-of-use assets information for the three months ended December 31, 2021 and December 31, 2020 was as follows:
Supplemental balance sheet information related to the leases as of December 31, 2021 was as follows:
Maturities of lease liabilities as of December 31, 2021 are as follows:
Exited (Restructured) Facilities As of December 31, 2021, we have net liabilities of $2.7 million related to excess facilities (compared to $3.6 million at September 30, 2021), representing $0.9 million of right-of-use assets and $3.6 million of lease obligations, of which $3.0 million is classified as short term and $0.6 million is classified as long term. Variable costs related to these exited facilities are included in our restructuring accrual. All expenses and income associated with exited facilities are included in restructuring and other charges, net (refer to Note 3. Restructuring and Other Charges). In determining the amount of right-of-use assets for restructured facilities, we are required to estimate such factors as future vacancy rates, the time required to sublet properties and sublease rates. Updates to these estimates may result in revisions to the value of right-of-use assets recorded. The amounts recorded are based on the net present value of estimated sublease income. As of December 31, 2021, the right-of-use assets for exited facilities reflects discounted committed sublease income of approximately $0.9 million. In the first quarter of 2022 and 2021, we made net payments of $0.7 million and $3.8 million, respectively, related to lease costs for exited facilities. |
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Commitments and Contingencies |
3 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Commitments And Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies |
15. Commitments and Contingencies As December 31, 2021 and December 31, 2020, we had letters of credit and bank guarantees outstanding of $15.3 million (of which $0.5 million was collateralized) and $16.5 million (of which $0.5 million was collateralized), respectively, primarily related to our corporate headquarters lease. Legal and Regulatory Matters Legal Proceedings With respect to legal proceedings and claims, we record an accrual for a contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
401(k) Plan On September 17, 2020, three individual plaintiffs filed a putative class action lawsuit against PTC, the Investment Committee for the PTC Inc. 401(k) Plan (“Plan”), and the Board of Directors (collectively, the “PTC Defendants”) in the U.S. District Court for the District of Massachusetts alleging claims regarding the Plan. Plaintiffs allege that the defendants breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 ("ERISA") in the oversight of the Plan, principally by allegedly selecting and retaining certain investment options despite their higher fees and costs than other available investment options, causing participants in the Plan to pay excessive recordkeeping fees and suffer lower returns on their investments, and by allegedly failing to monitor other fiduciaries. The plaintiffs seek unspecified damages on behalf of a class of Plan participants from September 17, 2014 through the date of any judgment. The plaintiffs and the PTC Defendants reached an agreement in principle to settle the lawsuit on September 22, 2021 and filed a motion for preliminary approval on December 17, 2021. The ultimate outcome by judgment or settlement is not expected to be material to our financial position, results of operations or cash flows. Other Legal Proceedings In addition to the matters listed above, we are subject to legal proceedings and claims against us in the ordinary course of business. As of December 31, 2021, we estimate that the range of possible outcomes for such matters is immaterial and we do not believe that resolving them will have a material adverse impact on our financial condition, results of operations or cash flows. However, the results of legal proceedings cannot be predicted with certainty. Should any of these legal proceedings and claims be resolved against us, the operating results for a reporting period could be adversely affected. Guarantees and Indemnification Obligations We enter into standard indemnification agreements with our customers and business partners in the ordinary course of our business. Under such agreements, we typically indemnify, hold harmless, and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, in connection with patent, copyright or other intellectual property infringement claims by any third party with respect to our products. Indemnification may also cover other types of claims, including claims relating to certain data breaches. Except for intellectual property infringement indemnification, the liability for which is uncapped, these agreements typically limit our liability with respect to other indemnification claims. Historically, our costs to defend lawsuits or settle claims relating to such indemnity agreements have been minimal and, accordingly, we believe the estimated fair value of liabilities under these agreements is immaterial. We warrant that our software products will perform in all material respects in accordance with our standard published specifications during the term of the license/subscription. Additionally, we generally warrant that our consulting services will be performed consistent with generally accepted industry standards and, in the case of fixed price services, the agreed-upon specifications. In most cases, liability for these warranties is capped. If necessary, we would provide for the estimated cost of product and service warranties based on specific warranty claims and claim history; however, we have not incurred significant cost under our product or services warranties. As a result, we believe the estimated fair value of these liabilities is immaterial. |
Subsequent Events |
3 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Subsequent Events [Abstract] | |
| Subsequent Events |
16. Subsequent Events Credit Facility Loan Repayment On February 2, 2022, we paid $40 million of outstanding balance on our revolving credit facility. Sale of Matterport Equity Securities In January 2022, we sold 4,316,301 common shares of Matterport for an aggregate price of $39.1 million. The sale will result in a loss to be recorded in Q2’22 of $48.2 million due to the reduction in value as of December 31, 2021 compared to the price when sold. Stock Repurchase Settlement In January 2022, we settled the trades we entered to purchase an incremental 43 thousand shares for an aggregate price of $5.3 million. |
Revenue from Contracts with Customers (Tables) |
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue From Contract With Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Contract Assets and Liabilities |
Contract Assets and Contract Liabilities
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| Disaggregation of Revenue |
Disaggregation of Revenue
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Restructuring and Other Charges (Tables) |
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| Restructuring And Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Restructuring Reserve by Type of Cost |
The following table summarizes restructuring accrual activity for the three months ended December 31, 2021:
The following table summarizes restructuring accrual activity for the three months ended December 31, 2020:
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Stock-based Compensation (Tables) |
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share Based Compensation Allocation And Classification In Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of RSU Activity |
The following table shows RSU activity for the three months ended December 31, 2021:
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| Schedule of Number of RSU Awards Granted by Award Type |
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| Schedule of Valuation Assumptions |
The significant assumptions used in the Monte Carlo simulation model were as follows:
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| Schedule of Classification of Compensation Expense |
Compensation expense recorded for our stock-based awards is classified in our Consolidated Statements of Operations as follows:
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Earnings per Share (EPS) and Common Stock (Tables) |
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| Earnings Per Share And Common Stock [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings per Share Basic and Diluted |
The following table presents the calculation for both basic and diluted EPS:
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Goodwill and Intangible Assets (Tables) |
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| Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Goodwill and Acquired Intangible Assets |
Goodwill and acquired intangible assets consisted of the following:
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| Schedule of Changes in Goodwill by Reportable Segments |
Changes in goodwill presented by reportable segments were as follows:
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| Schedule of Aggregate Amortization Expense for Intangible Assets with Finite Lives |
The aggregate amortization expense for intangible assets with finite lives is classified in our Consolidated Statements of Operations as follows:
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Fair Value Measurements (Tables) |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value, by Balance Sheet Grouping |
Our significant financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and September 30, 2021 were as follows:
(1) Money market funds and time deposits. |
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| Schedule of Changes in Fair Value of Level 3 Investment |
The following table provides a summary of changes in the fair value of our Level 3 investment in the Matterport, Inc. shares:
(1) The restriction on our ability to sell our shares lapsed in January 2022. Refer to Note 16. Subsequent Events for discussion regarding the expirations on the restriction and our subsequent sale of the Equity Securities in January 2022. |
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Derivative Financial Instruments (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments And Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Derivative Instruments in Statement of Financial Position, Fair Value |
The following table shows our derivative instruments measured at gross fair value as reflected in the Consolidated Balance Sheets:
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| Schedule of Notional Amounts of Outstanding Forward Contracts and Options |
As of December 31, 2021 and September 30, 2021, we had outstanding forward contracts and options with notional amounts equivalent to the following:
As of December 31, 2021 and September 30, 2021, we had outstanding forward contracts designated as net investment hedges with notional amounts equivalent to the following:
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| Schedule of Net Gains and Losses on Foreign Currency Exposures |
The following table shows the effect of our non-designated hedges in the Consolidated Statements of Operations for the three months ended December 31, 2021 and December 31, 2020:
The following table shows the effect of our derivative instruments designated as net investment hedges in the Consolidated Statements of Operations for the three months ended December 31, 2021 and December 31, 2020:
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| Schedule of Offsetting Assets |
The following table sets forth the offsetting of derivative assets as of December 31, 2021:
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| Schedule of Offsetting Liabilities |
The following table sets forth the offsetting of derivative liabilities as of December 31, 2021:
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Segment and Geographic Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Revenue and Profit Attributable to Our Operating Segments |
The revenue and profit attributable to our operating segments are summarized below. We do not produce asset information by reportable segment; therefore, it is not reported.
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| Summary of Revenue for Geographic Regions |
Our international revenue is presented based on the location of our customer. Revenue for the geographic regions in which we operate is presented below.
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Income Taxes (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Income Taxes |
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Debt (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Long-term Debt Obligations |
At December 31, 2021 and September 30, 2021, we had the following long-term debt obligations:
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Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Components of Lease Cost |
The components of lease cost reflected in the Consolidated Statement of Operations for the three months ended December 31, 2021 and December 31, 2020 were as follows:
Supplemental cash flow and right-of-use assets information for the three months ended December 31, 2021 and December 31, 2020 was as follows:
Supplemental balance sheet information related to the leases as of December 31, 2021 was as follows:
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| Schedule of Maturities of Lease Liabilities |
Maturities of lease liabilities as of December 31, 2021 are as follows:
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Revenue from Contracts with Customers - Schedule of Contract Assets and Contract Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Revenue From Contract With Customer [Abstract] | ||
| Contract asset | $ 13,177 | $ 12,934 |
| Deferred revenue | $ 481,070 | $ 497,677 |
Revenue from Contracts with Customers - Remaining Performance Obligations - Additional Information (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-01-01 |
Dec. 31, 2021 |
|---|---|
| Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items] | |
| Revenue, remaining performance obligation, expected timing of satisfaction, percentage | 83.00% |
| Revenue, remaining performance obligation, expected timing of satisfaction, period | 24 months |
Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Disaggregation Of Revenue [Line Items] | ||
| Revenue | $ 457,721 | $ 429,050 |
| Recurring revenue | ||
| Disaggregation Of Revenue [Line Items] | ||
| Revenue | 405,125 | 384,957 |
| Perpetual license | ||
| Disaggregation Of Revenue [Line Items] | ||
| Revenue | 8,468 | 8,463 |
| Professional services | ||
| Disaggregation Of Revenue [Line Items] | ||
| Revenue | $ 44,128 | $ 35,630 |
Restructuring and Other Charges - Schedule of Restructuring Reserve (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Restructuring Reserve [Roll Forward] | ||
| Accrual, beginning balance | $ 5,486 | $ 9,987 |
| Charges to operations, net | 34,144 | 131 |
| Cash disbursements | (9,828) | (3,420) |
| Foreign exchange impact | (117) | 54 |
| Accrual, ending balance | 29,685 | 6,752 |
| Employee Severance and Related Benefits | ||
| Restructuring Reserve [Roll Forward] | ||
| Accrual, beginning balance | 1,981 | 3,992 |
| Charges to operations, net | 34,072 | 160 |
| Cash disbursements | (9,145) | (2,733) |
| Foreign exchange impact | (117) | 42 |
| Accrual, ending balance | 26,791 | 1,461 |
| Facility Closures and Related Costs | ||
| Restructuring Reserve [Roll Forward] | ||
| Accrual, beginning balance | 3,505 | 5,995 |
| Charges to operations, net | 72 | (29) |
| Cash disbursements | (683) | (687) |
| Foreign exchange impact | 0 | 12 |
| Accrual, ending balance | $ 2,894 | $ 5,291 |
Stock-based Compensation -Schedule of RSU Activity (Details) - Restricted Stock Units (RSUs) shares in Thousands |
3 Months Ended |
|---|---|
|
Dec. 31, 2021
$ / shares
shares
| |
| Number of RSUs | |
| Balance of outstanding restricted stock units, beginning, Shares | shares | 3,216 |
| Granted, shares | shares | 899 |
| Vested, Shares | shares | (1,119) |
| Forfeited or not earned, Shares | shares | (126) |
| Balance of outstanding restricted stock units, ending, Shares | shares | 2,869 |
| Weighted- Average Grant Date Fair Value Per RSU | |
| Balance of outstanding restricted stock units, beginning (in USD per share) | $ / shares | $ 92.83 |
| Granted (in USD per share) | $ / shares | 117.10 |
| Vested (in USD per share) | $ / shares | 91.64 |
| Forfeited or not earned (in USD per share) | $ / shares | 93.80 |
| Balance of outstanding restricted stock units, ending (in USD per share) | $ / shares | $ 100.85 |
Stock-based Compensation - Schedule of RSU Activity (Parenthetical) (Details) shares in Thousands |
1 Months Ended |
|---|---|
|
Nov. 30, 2021
shares
| |
| Prior Period TSR Awards | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Granted, shares | 37 |
Stock-based Compensation - Schedule of Number of RSU Awards Granted by Award Type (Details) shares in Thousands |
3 Months Ended |
|---|---|
|
Dec. 31, 2021
shares
| |
| Performance-Based Restricted Stock Units | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Granted, shares | 163 |
| Service-Based Restricted Stock Units | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Granted, shares | 623 |
| TSR Units | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Granted, shares | 76 |
Stock-based Compensation - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Stock-based compensation | $ 45,942 | $ 46,088 |
| Employee Stock Purchase Plan | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Stock-based compensation | $ 2,000 | $ 1,900 |
| TSR Units | ||
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
| Weighted average fair value per share | $ 136.43 | |
Stock-based Compensation - Schedule of Valuation Assumptions (Details) |
3 Months Ended |
|---|---|
Dec. 31, 2021 | |
| Volatility Assumptions [Abstract] | |
| Average volatility of peer group | 34.67% |
| Risk free interest rate | 0.81% |
| Dividend yield | 0.00% |
Earnings per Share (EPS) and Common Stock - Earnings per Share Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Earnings Per Share And Common Stock [Abstract] | ||
| Net income | $ 46,089 | $ 23,515 |
| Weighted-average shares outstanding—Basic | 117,347 | 116,401 |
| Dilutive effect of restricted stock units | 1,251 | 1,204 |
| Weighted-average shares outstanding—Diluted | 118,598 | 117,605 |
| Earnings per share—Basic | $ 0.39 | $ 0.20 |
| Earnings per share—Diluted | $ 0.39 | $ 0.20 |
Earnings per Share (EPS) and Common Stock - Additional Information (Details) - USD ($) |
1 Months Ended | 3 Months Ended | ||
|---|---|---|---|---|
Jan. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Sep. 30, 2021 |
|
| Earnings Per Share and Common Stock [Line Items] | ||||
| Stock option restricted shares and restricted stock units excluded from computation of EPS, shares | 0 | 100,000 | ||
| Common stock, shares authorized | 500,000,000 | 500,000,000 | ||
| Stock repurchase program, authorized amount | $ 1,000,000,000 | |||
| Repurchases of common stock | 1,003,000 | |||
| Stock repurchased during period, value | $ 119,700,000 | $ 0 | ||
| Subsequent Event | ||||
| Earnings Per Share and Common Stock [Line Items] | ||||
| Repurchases of common stock | 43,000 | |||
| Incremental common shares attributable to dilutive effect of equity unit purchase agreements | 43,000 | |||
| Incremental common shares attributable to equity unit purchase agreements, value | $ 5,200,000 | |||
| Stock repurchased during period, value | $ 5,300,000 | |||
Goodwill and Intangible Assets - Additional Information (Details) $ in Thousands |
3 Months Ended | |
|---|---|---|
|
Dec. 31, 2021
USD ($)
Segment
|
Sep. 30, 2021
USD ($)
|
|
| Number of operating segments | Segment | 2 | |
| Number of reportable segments | Segment | 2 | |
| Intangible assets | $ 2,553,757 | $ 2,570,854 |
| Software Products | ||
| Intangible assets | 2,508,800 | 2,525,700 |
| Professional Services | ||
| Intangible assets | $ 45,000 | $ 45,200 |
Goodwill and Intangible Assets - Schedule of Changes in Goodwill by Reportable Segments (Details) $ in Thousands |
3 Months Ended |
|---|---|
|
Dec. 31, 2021
USD ($)
| |
| Goodwill [Line Items] | |
| Balance, October 1, 2021 | $ 2,191,887 |
| Goodwill, acquired | 691 |
| Foreign currency translation adjustment | (2,698) |
| Balance, December 31, 2021 | 2,189,880 |
| Software Products | |
| Goodwill [Line Items] | |
| Balance, October 1, 2021 | 2,148,968 |
| Goodwill, acquired | 691 |
| Foreign currency translation adjustment | (2,645) |
| Balance, December 31, 2021 | 2,147,014 |
| Professional Services | |
| Goodwill [Line Items] | |
| Balance, October 1, 2021 | 42,919 |
| Goodwill, acquired | 0 |
| Foreign currency translation adjustment | (53) |
| Balance, December 31, 2021 | $ 42,866 |
Goodwill and Intangible Assets - Schedule of Aggregate Amortization Expense for Intangible Assets with Finite Lives (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Goodwill And Intangible Assets Disclosure [Abstract] | ||
| Amortization of acquired intangible assets | $ 8,484 | $ 6,547 |
| Cost of license revenue | 6,493 | 6,267 |
| Total amortization expense | $ 14,977 | $ 12,814 |
Fair Value Measurements - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Sep. 30, 2021 |
|
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
| Non-marketable equity investments | $ 2,200 | $ 2,200 | |
| Net income (loss) | 46,089 | $ 23,515 | |
| Level 3 | |||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
| Amount invested in non-marketable convertible note | $ 2,000 | ||
| Level 3 | Matterport, Inc. | Equity Securities | |||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
| Assets recognized at fair value | 87,300 | ||
| Level 3 | Matterport, Inc. | Equity Securities | Other Income | |||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
| Net income (loss) | $ 9,800 | ||
| Level 3 | Common Stock | Matterport, Inc. | Equity Securities | |||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
| Number of shares issued | 4,316,301 | ||
Fair Value Measurements - Schedule of Changes in Fair Value of Level 3 Investment (Details) - Matterport, Inc. - Level 3 $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
|
Dec. 31, 2021
USD ($)
| ||||
| Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
| Beginning balance | $ 77,540 | |||
| Unrealized gains | 7,467 | |||
| Reduction in discount due to lack of marketability | 2,299 | [1] | ||
| Ending balance | $ 87,306 | |||
| ||||
Marketable Securities - Additional Information (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Sep. 30, 2021 |
|
| Marketable Securities [Abstract] | |||
| Marketable securities held | $ 0 | $ 0 | |
| Proceeds from sale of marketable securities | $ 0 | $ 56,170,000 | |
Derivative Financial Instruments - Schedule of Derivative Financial Instruments at Gross Fair Value (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Derivative [Line Items] | ||
| Gross Amount of Recognized Assets | $ 2,021 | |
| Designated as Hedging Instrument | Forward Contracts | ||
| Derivative [Line Items] | ||
| Gross Amount of Recognized Assets | 0 | $ 1,641 |
| Gross Amount of Recognized Liabilities | 1,248 | 0 |
| Designated as Hedging Instrument | Options | ||
| Derivative [Line Items] | ||
| Gross Amount of Recognized Assets | 0 | 0 |
| Not Designated as Hedging Instrument | Forward Contracts | ||
| Derivative [Line Items] | ||
| Fair Value of Derivatives Not Designated As Hedging Instruments | 1,486 | 3,722 |
| Fair Value of Derivatives Not Designated As Hedging Instruments | 2,484 | 3,318 |
| Not Designated as Hedging Instrument | Options | ||
| Derivative [Line Items] | ||
| Fair Value of Derivatives Not Designated As Hedging Instruments | $ 2,021 | $ 0 |
Derivative Financial Instruments - Schedule of Derivative Financial Instruments at Gross Fair Value (Parentheticals) (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Derivative [Line Items] | ||
| Gross Amount of Recognized Assets | $ 2,021 | |
| Other Current Assets | Forward Contracts | ||
| Derivative [Line Items] | ||
| Gross Amount of Recognized Assets | 3,500 | $ 5,400 |
| Other Current Liabilities | Forward Contracts | ||
| Derivative [Line Items] | ||
| Gross Amount of Recognized Liabilities | $ 3,700 | $ 3,300 |
Derivative Financial Instruments - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Derivative [Line Items] | ||
| Gain (Loss) on foreign currency | $ (4.4) | $ (1.8) |
| Maximum | Forward Contracts | Not Designated as Hedging Instrument | ||
| Derivative [Line Items] | ||
| Derivative maturity | 3 months | |
| Maximum | Forward Contracts | Designated as Hedging Instrument | Net Investment Hedging | ||
| Derivative [Line Items] | ||
| Derivative maturity | 3 months | |
| Maximum | Foreign Exchange Options | Not Designated as Hedging Instrument | ||
| Derivative [Line Items] | ||
| Derivative maturity | 10 months | |
Derivative Financial Instruments - Schedule of Notional Amounts of Outstanding Forward Contracts and Options (Details) - Not Designated as Hedging Instrument - Foreign Exchange Forward Contract and Options - USD ($) $ in Thousands |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Derivative [Line Items] | ||
| Notional amount | $ 715,281 | $ 563,921 |
| Canadian / U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 5,256 | 4,894 |
| Euro / U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 586,301 | 387,466 |
| British Pound / U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 5,300 | 23,141 |
| Israeli Shekel / U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 13,859 | 10,475 |
| Japanese Yen / U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 43,066 | 46,450 |
| Swiss Franc / U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 7,621 | 18,039 |
| Swedish Krona / U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 16,683 | 34,196 |
| Singapore Dollar / U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 3,806 | 3,498 |
| Chinese Renminbi / U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 19,496 | 23,297 |
| New Taiwan Dollar / U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 2,669 | 3,369 |
| Romanian Leu/ U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 3,971 | 778 |
| Russian Ruble/ U.S. Dollar | ||
| Derivative [Line Items] | ||
| Notional amount | 0 | 2,614 |
| All other | ||
| Derivative [Line Items] | ||
| Notional amount | $ 7,253 | $ 5,704 |
Derivative Financial Instruments - Schedule of Notional Amounts of Outstanding Forward Contracts and Options (Parenthetical) (Details) - Not Designated as Hedging Instrument $ in Millions |
Dec. 31, 2021
USD ($)
|
|---|---|
| Foreign Exchange Forward | Japanese Yen / U.S. Dollar | |
| Derivative [Line Items] | |
| Notional amount | $ 388.7 |
| Foreign Exchange Forward | Euro / U.S. Dollar | |
| Derivative [Line Items] | |
| Notional amount | 16.8 |
| Options | Japanese Yen / U.S. Dollar | |
| Derivative [Line Items] | |
| Notional amount | 197.6 |
| Options | Euro / U.S. Dollar | |
| Derivative [Line Items] | |
| Notional amount | $ 26.3 |
Derivative Financial Instruments - Schedule of Derivative Instruments and Hedging Activities Disclosures (Details) - Foreign Exchange Forward - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Not Designated as Hedging Instrument | Other income (expense), net | ||
| Derivative Instruments Gain Loss [Line Items] | ||
| Net realized and unrealized loss, excluding the underlying foreign currency exposure being hedged | $ (3,435) | $ (1,587) |
| Designated as Hedging Instrument | Net Investment Hedging | ||
| Derivative Instruments Gain Loss [Line Items] | ||
| Gain (loss) recognized in OCI | (3,156) | 580 |
| Gain (loss) reclassified from OCI | (5,735) | 2,942 |
| Designated as Hedging Instrument | Other income (expense), net | Net Investment Hedging | ||
| Derivative Instruments Gain Loss [Line Items] | ||
| Gain recognized, excluded portion | $ 267 | $ 307 |
Derivative Financial Instruments - Schedule of Notional Amounts of Outstanding Forward Contracts (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Euro / U.S. Dollar | Foreign Exchange Forward | Designated as Hedging Instrument | Net Investment Hedging | ||
| Derivative [Line Items] | ||
| Notional amount | $ 179,797 | $ 128,103 |
Derivative Financial Instruments - Schedule of Offsetting Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Derivative [Line Items] | ||
| Gross Amount of Recognized Assets | $ 2,021 | |
| Net Amounts of Assets Presented in the Consolidated Balance Sheets | 1,486 | $ 5,363 |
| Foreign Currency Forwards | ||
| Derivative [Line Items] | ||
| Gross Amount of Recognized Assets | 1,486 | |
| Gross Amounts Offset in the Consolidated Balance Sheets | 0 | |
| Net Amounts of Assets Presented in the Consolidated Balance Sheets | 1,486 | |
| Gross Amounts Not Offset in the Consolidated Balance Sheets, Financial Instruments | (1,486) | |
| Gross Amounts Not Offset in the Consolidated Balance Sheets, Cash Collateral Received | 0 | |
| Net Amount | $ 0 |
Derivative Financial Instruments - Schedule of Offsetting Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Derivative [Line Items] | ||
| Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | $ 3,732 | $ 3,318 |
| Foreign Currency Forwards | ||
| Derivative [Line Items] | ||
| Gross Amount of Recognized Liabilities | 3,732 | |
| Gross Amounts Offset in the Consolidated Balance Sheets | 0 | |
| Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | 3,732 | |
| Gross Amounts Not Offset in the Consolidated Balance Sheets, Financial Instruments | (1,486) | |
| Gross Amounts Not Offset in the Consolidated Balance Sheets, Cash Collateral Pledged | 0 | |
| Net Amount | $ 2,246 |
Segment and Geographic Information - Additional Information (Details) |
3 Months Ended |
|---|---|
|
Dec. 31, 2021
Segment
| |
| Segment Reporting [Abstract] | |
| Number of operating segments | 2 |
| Number of reportable segments | 2 |
Segment and Geographic Information - Summary of Revenue and Profit Attributable to Our Operating Segments (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Segment Reporting Revenue Reconciling Item [Line Items] | ||
| Revenue | $ 457,721 | $ 429,050 |
| Operating costs | 95,118 | 86,830 |
| Gross margin | 362,603 | 342,220 |
| Sales and marketing | 125,476 | 124,725 |
| General and administrative | 51,940 | 49,528 |
| Restructuring and other charges, net | 33,991 | 247 |
| Intangibles amortization | 14,977 | 12,814 |
| Operating income | 62,178 | 90,338 |
| Interest and debt premium expense | (12,986) | (11,518) |
| Other income (expense), net | 6,184 | (1,413) |
| Income before income taxes | 55,376 | 77,407 |
| Operating Segments | ||
| Segment Reporting Revenue Reconciling Item [Line Items] | ||
| Revenue | 457,721 | 429,050 |
| Operating costs | 153,011 | 138,521 |
| Gross margin | 304,710 | 290,529 |
| Unallocated | ||
| Segment Reporting Revenue Reconciling Item [Line Items] | ||
| Sales and marketing | 112,395 | 109,726 |
| General and administrative | 34,177 | 27,400 |
| Restructuring and other charges, net | 33,991 | 247 |
| Intangibles amortization | 14,977 | 12,814 |
| Stock-based compensation | 45,942 | 46,088 |
| Other unallocated operating expenses | 1,050 | 3,916 |
| Software Products | Operating Segments | ||
| Segment Reporting Revenue Reconciling Item [Line Items] | ||
| Revenue | 413,593 | 393,420 |
| Operating costs | 116,028 | 105,401 |
| Gross margin | 297,565 | 288,019 |
| Professional Services | Operating Segments | ||
| Segment Reporting Revenue Reconciling Item [Line Items] | ||
| Revenue | 44,128 | 35,630 |
| Operating costs | 36,983 | 33,120 |
| Gross margin | $ 7,145 | $ 2,510 |
Segment and Geographic Information - Revenue By Geographic Segment (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Segment Reporting Revenue Reconciling Item [Line Items] | ||
| Total revenue | $ 457,721 | $ 429,050 |
| Operating Segments | ||
| Segment Reporting Revenue Reconciling Item [Line Items] | ||
| Total revenue | 457,721 | 429,050 |
| Americas | Operating Segments | ||
| Segment Reporting Revenue Reconciling Item [Line Items] | ||
| Total revenue | 212,881 | 202,279 |
| Europe | Operating Segments | ||
| Segment Reporting Revenue Reconciling Item [Line Items] | ||
| Total revenue | 162,308 | 162,319 |
| Asia-Pacific | Operating Segments | ||
| Segment Reporting Revenue Reconciling Item [Line Items] | ||
| Total revenue | $ 82,532 | $ 64,452 |
Income Taxes - Summary of Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Income Tax Disclosure [Abstract] | ||
| Income before income taxes | $ 55,376 | $ 77,407 |
| Provision for income taxes | $ 9,287 | $ 53,892 |
| Effective income tax rate | 17.00% | 70.00% |
Income Taxes - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | ||
|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Sep. 30, 2021 |
|
| Income Tax Disclosure [Abstract] | |||
| Federal statutory income tax rate | 21.00% | 21.00% | |
| Charge related to effects of Non US Jurisdiction unrecognized tax benefit | $ 35.3 | ||
| Unrecognized tax benefits | $ 21.8 | $ 21.2 | |
| Income tax provision upon recognition of unrecognized tax benefit | 21.8 | ||
| Unrecognized tax benefits that would impact valuation allowance | 4.7 | ||
| Potential decrease in unrecognized tax benefits | $ 1.0 | ||
Debt - Schedule of Long-term Debt Obligations (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Sep. 30, 2021 |
Feb. 13, 2020 |
|---|---|---|---|
| Debt Instrument [Line Items] | |||
| Total debt | $ 1,450,000 | $ 1,450,000 | |
| Unamortized debt issuance costs for the senior notes | (9,986) | (10,529) | |
| Total debt, net of issuance costs | 1,440,014 | 1,439,471 | |
| 4.000% Senior Notes Due 2028 | |||
| Debt Instrument [Line Items] | |||
| Senior Notes | $ 500,000 | ||
| 3.625% Senior Notes Due 2025 | |||
| Debt Instrument [Line Items] | |||
| Senior Notes | $ 500,000 | ||
| Long-term Debt [Member] | Line of Credit | |||
| Debt Instrument [Line Items] | |||
| Credit facility revolver | 450,000 | 450,000 | |
| Long-term Debt [Member] | 4.000% Senior Notes Due 2028 | |||
| Debt Instrument [Line Items] | |||
| Senior Notes | 500,000 | 500,000 | |
| Long-term Debt [Member] | 3.625% Senior Notes Due 2025 | |||
| Debt Instrument [Line Items] | |||
| Senior Notes | $ 500,000 | $ 500,000 |
Debt - Schedule of Long-term Debt Obligations (Parenthetical) (Details) - USD ($) $ in Thousands |
Dec. 31, 2021 |
Sep. 30, 2021 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Unamortized Debt Issuance Expense | $ 9,986 | $ 10,529 |
| Other Noncurrent Assets | Line of Credit | ||
| Debt Instrument [Line Items] | ||
| Unamortized Debt Issuance Expense | $ 3,500 | $ 3,800 |
Debt - Senior Notes - Additional Information (Details) - USD ($) $ in Millions |
Feb. 13, 2020 |
Dec. 31, 2021 |
|---|---|---|
| Senior Notes | ||
| Debt Instrument [Line Items] | ||
| Redemption price, percentage | 101.00% | |
| 4.000% Senior Notes Due 2028 | ||
| Debt Instrument [Line Items] | ||
| Senior Notes | $ 500.0 | |
| Interest rate | 4.00% | |
| 4.000% Senior Notes Due 2028 | Senior Notes | ||
| Debt Instrument [Line Items] | ||
| Fair value amount | $ 513.0 | |
| 3.625% Senior Notes Due 2025 | ||
| Debt Instrument [Line Items] | ||
| Senior Notes | $ 500.0 | |
| Interest rate | 3.625% | |
| 3.625% Senior Notes Due 2025 | Senior Notes | ||
| Debt Instrument [Line Items] | ||
| Fair value amount | $ 508.0 |
Debt - Credit Agreement - Additional Information (Details) - USD ($) |
3 Months Ended | ||||
|---|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Feb. 01, 2022 |
Sep. 30, 2021 |
Feb. 13, 2020 |
|
| Debt Instrument [Line Items] | |||||
| Credit facility amount | $ 1,000,000,000 | ||||
| Voting interest in domestic subsidiaries pledged against credit facility | 100.00% | ||||
| Voting interest in foreign subsidiaries pledged against credit facility | 65.00% | ||||
| Leverage ratio, actual | 2.23 | ||||
| Senior debt leverage ratio, actual | 0.71 | ||||
| Fixed charge coverage ratio, actual | 14.02 | ||||
| Periodic interest payment | $ 2,400,000 | $ 700,000 | |||
| Interest rate during period | 3.20% | 3.80% | |||
| Foreign Subsidiary | Subsequent Event | |||||
| Debt Instrument [Line Items] | |||||
| Long-term portion of long term debt | $ 0 | ||||
| Line of Credit | |||||
| Debt Instrument [Line Items] | |||||
| Line of credit facility, maximum borrowing capacity expansion amount | $ 500,000,000 | ||||
| Credit facility maturity date | Feb. 13, 2025 | ||||
| Basis spread on Federal Reserve Bank of New York (FRBNY) rate | 0.50% | ||||
| Basis spread on adjusted LIBOR | 1.00% | ||||
| Investment limit in foreign subsidiaries | $ 100,000,000 | ||||
| Cash investment limit for acquisition of business | $ 200,000,000 | ||||
| Total leverage ratio | 4.50 | ||||
| Senior secured leverage ratio | 3.00 | ||||
| Minimum fixed charge coverage ratio allowed under debt covenant | 3.00 | ||||
| Line of Credit | Long-term Debt | |||||
| Debt Instrument [Line Items] | |||||
| Long-term portion of long term debt | $ 450,000,000 | $ 450,000,000 | |||
| Annual rate for borrowing outstanding | 1.69% | ||||
| Line of Credit | Minimum | |||||
| Debt Instrument [Line Items] | |||||
| Variable interest rate, length of time between updates | 30 days | ||||
| Credit facility commitment fees percentage | 0.175% | ||||
| Line of Credit | Minimum | London Interbank Offered Rate (LIBOR) | |||||
| Debt Instrument [Line Items] | |||||
| Basis spread on variable rate | 1.25% | ||||
| Line of Credit | Minimum | Base Rate | |||||
| Debt Instrument [Line Items] | |||||
| Basis spread on variable rate | 0.25% | ||||
| Line of Credit | Maximum | |||||
| Debt Instrument [Line Items] | |||||
| Variable interest rate, length of time between updates | 180 days | ||||
| Credit facility commitment fees percentage | 0.30% | ||||
| Line of Credit | Maximum | London Interbank Offered Rate (LIBOR) | |||||
| Debt Instrument [Line Items] | |||||
| Basis spread on variable rate | 1.75% | ||||
| Line of Credit | Maximum | Base Rate | |||||
| Debt Instrument [Line Items] | |||||
| Basis spread on variable rate | 0.75% | ||||
Leases - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Sep. 30, 2021 |
Feb. 28, 2019 |
|
| Lessee Lease Description [Line Items] | ||||
| Lease expiration date | 2037 | |||
| Payments to be received as sublease income | $ 9,100 | |||
| Operating right-of-use lease assets | $ 150,261 | $ 152,337 | ||
| Operating lease, liability | 206,032 | |||
| Lease Cost | ||||
| Operating cash flows from operating leases | 15,865 | $ 14,060 | ||
| Facility Closures and Related Costs | ||||
| Lessee Lease Description [Line Items] | ||||
| Operating lease liability, net. restructured facilities | 2,700 | $ 3,600 | ||
| Operating right-of-use lease assets | 900 | |||
| Operating lease, liability | 3,600 | |||
| Lease Cost | ||||
| Operating cash flows from operating leases | 700 | $ 3,800 | ||
| Facility Closures and Related Costs | Operating Lease Short Term Lease Obligation | ||||
| Lessee Lease Description [Line Items] | ||||
| Operating lease, liability | 3,000 | |||
| Facility Closures and Related Costs | Operating Lease Long Term Lease Obligation | ||||
| Lessee Lease Description [Line Items] | ||||
| Operating lease, liability | 600 | |||
| Sublease Income Committed | ||||
| Lessee Lease Description [Line Items] | ||||
| Sublease income assumed | $ 900 | |||
Leases - Components of Lease Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Lease Cost | ||
| Operating lease cost | $ 8,860 | $ 9,391 |
| Short-term lease cost | 540 | 548 |
| Variable lease cost | 2,490 | 2,387 |
| Sublease income | (1,117) | (1,084) |
| Total lease cost | $ 10,773 | $ 11,242 |
Leases - Schedule of Supplemental Cash Flow and Right of Use Assets Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
|
| Leases [Abstract] | ||
| Operating cash flows from operating leases | $ 15,865 | $ 14,060 |
| Financing cash flows from financing leases | 239 | 279 |
| Right-of-use assets obtained in exchange for new lease obligations, operating leases | 601 | 594 |
| Right-of-use assets obtained in exchange for new lease obligations, financing leases | $ 0 | $ 0 |
Leases - Schedule of Supplemental Balance Sheet Information Related to Leases (Details) |
Dec. 31, 2021 |
|---|---|
| Leases [Abstract] | |
| Weighted-average remaining lease term - operating leases | 11 years 9 months 18 days |
| Weighted-average remaining lease term - financing leases | 4 years |
| Weighted-average discount rate - operating leases | 5.40% |
| Weighted-average discount rate - financing leases | 3.00% |
Leases - Schedule of Maturities of Lease Liabilities (Details) $ in Thousands |
Dec. 31, 2021
USD ($)
|
|---|---|
| Operating Lease (ASC 842) | |
| Remainder of 2022 | $ 28,792 |
| 2023 | 29,469 |
| 2024 | 26,191 |
| 2025 | 22,652 |
| 2026 | 18,681 |
| Thereafter | 159,162 |
| Total future lease payments | 284,947 |
| Less: imputed interest | (78,915) |
| Total lease liability | $ 206,032 |
Commitments and Contingencies - Additional Information (Details) $ in Millions |
3 Months Ended | |
|---|---|---|
|
Dec. 31, 2021
USD ($)
Plantiff
|
Dec. 31, 2020
USD ($)
|
|
| Loss Contingencies [Line Items] | ||
| Letters of credit and bank guarantees outstanding | $ 15.3 | $ 16.5 |
| Bank guarantees outstanding collateralized | $ 0.5 | $ 0.5 |
| Putative Class Action | ||
| Loss Contingencies [Line Items] | ||
| Lawsuit filing date | September 17, 2020 | |
| Number of plaintiffs | Plantiff | 3 | |
| Lawsuit action domicile | U.S. District Court for the District of Massachusetts | |
| Plaintiffs claim | The plaintiffs seek unspecified damages on behalf of a class of Plan participants from September 17, 2014 through the date of any judgment. |
Subsequent Events (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|---|
Feb. 02, 2022 |
Jan. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Mar. 31, 2022 |
|
| Subsequent Event [Line Items] | |||||
| Payment of outstanding balance on revolving credit facility | $ 0 | $ 18,000,000 | |||
| Net income (loss) | $ 46,089,000 | 23,515,000 | |||
| Repurchases of common stock | 1,003,000 | ||||
| Stock repurchased during period, value | $ 119,700,000 | $ 0 | |||
| Matterport, Inc. | Scenario Forecast | Equity Securities | |||||
| Subsequent Event [Line Items] | |||||
| Net income (loss) | $ (48,200,000) | ||||
| Subsequent Event | |||||
| Subsequent Event [Line Items] | |||||
| Payment of outstanding balance on revolving credit facility | $ 40,000,000 | ||||
| Repurchases of common stock | 43,000 | ||||
| Stock repurchased during period, value | $ 5,300,000 | ||||
| Subsequent Event | Matterport, Inc. | Equity Securities | |||||
| Subsequent Event [Line Items] | |||||
| Sale of common shares | 4,316,301 | ||||
| Sale of common shares aggregate price | $ 39,100,000 | ||||