Date of
report (Date of earliest event reported)
|
October 25, 2017
|
|
|
PTC Inc.
|
|
(Exact
Name of Registrant as Specified in Its Charter)
|
|
|
|
Massachusetts
|
|
(State
or Other Jurisdiction of Incorporation)
|
|
|
|
0-18059
|
04-2866152
|
(Commission
File Number)
|
(IRS
Employer Identification No.)
|
|
|
140 Kendrick Street
Needham, Massachusetts
|
02494-2714
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
|
|
(781) 370-5000
|
|
(Registrant’s
Telephone Number, Including Area Code)
|
|
|
|
|
|
(Former
Name or Former Address, if Changed Since Last Report)
|
Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
|
|
|
|
☐
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|
|
|
☐
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
|
☐
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
|
|
|
☐
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
|
|
PTC
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
October 25, 2017
|
By:
|
/s/
Andrew Miller
|
|
|
|
Andrew
Miller
|
|
|
|
Executive
Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
In millions except per share amounts
|
|
|
|
|
|
|
|
|
Operating Measures(1)
|
|
Q1’18 Low
|
|
Q1’18
High
|
|
FY’18 Low
|
|
FY’18 High
|
|
|
|
|
|
|
|
|
|
Subscription ACV
|
|
$ 28
|
|
$ 31
|
|
$ 178
|
|
$ 185
|
License and Subscription Bookings
|
|
$ 82
|
|
$ 92
|
|
$ 446
|
|
$ 464
|
Subscription % of Bookings
|
|
68%
|
|
68%
|
|
80%
|
|
80%
|
(1) An explanation of the
metrics included in this table is provided
below.
|
||||||||
Financial Measures
|
|
Q1’18 Low
|
|
Q1’18 High
|
|
FY’18 Low
|
|
FY’18 High
|
Subscription Revenue
|
|
$ 98
|
|
$ 100
|
|
$ 440
|
|
$ 450
|
Support Revenue
|
|
132
|
|
132
|
|
525
|
|
525
|
Perpetual License Revenue
|
|
27
|
|
30
|
|
90
|
|
95
|
Total Software Revenue
|
|
257
|
|
262
|
|
1,055
|
|
1,070
|
Professional Services Revenue
|
|
40
|
|
40
|
|
170
|
|
170
|
Total Revenue
|
|
$297
|
|
$ 302
|
|
$ 1,225
|
|
$ 1,240
|
|
|
|
|
|
|
|
|
|
Operating Expense (GAAP)
|
|
$ 199
|
|
$ 202
|
|
$ 814
|
|
$ 824
|
Operating Expense (Non-GAAP)
|
|
176
|
|
180
|
|
723
|
|
733
|
Operating Margin (GAAP)
|
|
5%
|
|
7%
|
|
7%
|
|
7%
|
Operating Margin (Non-GAAP)
|
|
16%
|
|
17%
|
|
17%
|
|
18%
|
Tax Rate (GAAP)
|
|
25%
|
|
25%
|
|
25%
|
|
25%
|
Tax Rate (Non-GAAP)
|
|
11%
|
|
9%
|
|
11%
|
|
9%
|
Shares Outstanding (GAAP)
|
|
117
|
|
117
|
|
117
|
|
117
|
Shares Outstanding (Non-GAAP)
|
|
117
|
|
117
|
|
117
|
|
117
|
EPS (GAAP)
|
|
$ 0.03
|
|
$ 0.05
|
|
$ 0.24
|
|
$ 0.30
|
EPS (Non-GAAP)
|
|
$ 0.28
|
|
$ 0.32
|
|
$ 1.27
|
|
$ 1.37
|
Free Cash Flow
|
|
|
|
|
|
$ 190
|
|
$ 200
|
In millions
|
|
Q1’18
|
|
FY’18
|
|
|
|
|
|
Effect of acquisition accounting on fair value of acquired deferred
revenue
|
|
$ -
|
|
$ 1
|
Stock-based compensation expense
|
|
17
|
|
70
|
Intangible asset amortization expense
|
|
15
|
|
58
|
Total Estimated Pre-Tax GAAP adjustments
|
|
$ 32
|
|
$ 129
|
PTC Inc.
|
|||||||
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
|
|||||||
(in thousands, except per share data)
|
|
Three Months Ended
|
Twelve Months Ended
|
||
|
September 30,
|
September 30,
|
September 30,
|
September 30,
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Revenue:
|
|
|
|
|
Subscription
|
$84,245
|
$40,665
|
$279,246
|
$118,322
|
Support
|
141,056
|
157,545
|
574,680
|
651,807
|
Total
recurring revenue
|
225,301
|
198,210
|
853,926
|
770,129
|
Perpetual
license
|
39,291
|
41,367
|
133,390
|
173,467
|
Total
subscription, support and license revenue
|
264,592
|
239,577
|
987,316
|
943,596
|
Professional
services
|
41,787
|
48,660
|
176,723
|
196,937
|
Total
revenue
|
306,379
|
288,237
|
1,164,039
|
1,140,533
|
|
|
|
|
|
Cost
of revenue:
|
|
|
|
|
Cost of license and subscription
revenue (1)
(2)
|
23,713
|
19,089
|
86,047
|
69,710
|
Cost of support revenue
(1)
(2)
|
23,174
|
22,059
|
92,202
|
85,729
|
Total
cost of software revenue
|
46,887
|
41,148
|
178,249
|
155,439
|
Cost of professional services
revenue(1)
|
35,918
|
41,708
|
150,770
|
170,226
|
Total
cost of revenue
|
82,805
|
82,856
|
329,019
|
325,665
|
|
|
|
|
|
Gross
margin
|
223,574
|
205,381
|
835,020
|
814,868
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Sales and marketing
(1)
|
101,378
|
102,985
|
372,946
|
367,465
|
Research and development
(1)
|
60,585
|
57,934
|
236,059
|
229,331
|
General and administrative
(1)
|
36,278
|
37,647
|
145,067
|
145,615
|
Amortization
of acquired intangible assets
|
8,122
|
8,158
|
32,108
|
33,198
|
Restructuring
charges (credits), net
|
(358)
|
31,732
|
7,942
|
76,273
|
Total
operating expenses
|
206,005
|
238,456
|
794,122
|
851,882
|
|
|
|
|
|
Operating
income (loss)
|
17,569
|
(33,075)
|
40,898
|
(37,014)
|
Other
expense, net
|
(12,114)
|
(10,298)
|
(42,304)
|
(30,178)
|
Income
(loss) before income taxes
|
5,455
|
(43,373)
|
(1,406)
|
(67,192)
|
Benefit for income taxes
(3)
|
(11,980)
|
(14,900)
|
(7,645)
|
(12,727)
|
Net
income (loss)
|
$17,435
|
$(28,473)
|
$6,239
|
$(54,465)
|
|
|
|
|
|
Earnings
(loss) per share:
|
|
|
|
|
Basic
|
$0.15
|
$(0.25)
|
$0.05
|
$(0.48)
|
Weighted
average shares outstanding
|
115,483
|
114,958
|
115,523
|
114,612
|
|
|
|
|
|
Diluted
|
$0.15
|
$(0.25)
|
$0.05
|
$(0.48)
|
Weighted
average shares outstanding
|
117,380
|
114,958
|
117,356
|
114,612
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The amounts in the tables above include stock-based compensation as
follows:
|
|
|
|
|
Three Months Ended
|
Twelve Months Ended
|
||
|
September 30,
|
September 30,
|
September 30,
|
September 30,
|
|
2017
|
2016
|
2017
|
2016
|
Cost
of license and subscription revenue
|
$425
|
$253
|
$1,379
|
$805
|
Cost
of support
|
1,478
|
982
|
5,116
|
4,593
|
Cost
of professional services revenue
|
1,616
|
1,321
|
6,116
|
5,393
|
Sales
and marketing
|
4,326
|
3,405
|
15,373
|
14,659
|
Research
and development
|
4,215
|
2,596
|
13,968
|
10,174
|
General
and administrative
|
8,509
|
5,618
|
34,756
|
30,372
|
Total
stock-based compensation
|
$20,569
|
$14,175
|
$76,708
|
$65,996
|
|
|
|
|
|
|
(2)
|
In the third quarter of 2017, PTC began reporting cost of support
revenue separate from cost of license and subscription revenue.
Costs for previous periods have also been separately reported to
conform to the current period presentation.
|
|||||||
|
(3)
|
In Q4’17 our effective tax rate was lower than the 35%
statutory federal income tax rate due, in large part, to our
corporate structure in which our foreign taxes are at an effective
tax rate lower than the U.S. Additionally, our rate includes a
benefit of $8.2M relating to a release of a valuation allowance in
a foreign jurisdiction recorded in the quarter.
|
PTC Inc.
|
||||||||||
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
|
||||||||||
(in thousands, except per share data)
|
|
Three Months Ended
|
Twelve Months Ended
|
||
|
September 30,
|
September 30,
|
September 30,
|
September 30,
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
GAAP
revenue
|
$306,379
|
$288,237
|
$1,164,039
|
$1,140,533
|
Fair
value adjustment of acquired deferred subscription
revenue
|
240
|
619
|
1,670
|
2,330
|
Fair
value adjustment of acquired deferred services revenue
|
255
|
266
|
1,043
|
1,139
|
Non-GAAP
revenue
|
$306,874
|
$289,122
|
$1,166,752
|
$1,144,002
|
|
|
|
|
|
GAAP
gross margin
|
$223,574
|
$205,381
|
$835,020
|
$814,868
|
Fair
value adjustment of acquired deferred revenue
|
495
|
885
|
2,713
|
3,469
|
Fair
value adjustment to deferred services cost
|
(108)
|
(114)
|
(437)
|
(492)
|
Stock-based
compensation
|
3,519
|
2,556
|
12,611
|
10,791
|
Amortization
of acquired intangible assets included in cost of
revenue
|
7,327
|
6,369
|
26,621
|
24,604
|
Non-GAAP
gross margin
|
$234,807
|
$215,077
|
$876,528
|
$853,240
|
|
|
|
|
|
GAAP
operating income (loss)
|
$17,569
|
$(33,075)
|
$40,898
|
$(37,014)
|
Fair
value adjustment of acquired deferred revenue
|
495
|
885
|
2,713
|
3,469
|
Fair
value adjustment to deferred services cost
|
(108)
|
(114)
|
(437)
|
(492)
|
Stock-based
compensation
|
20,569
|
14,175
|
76,708
|
65,996
|
Amortization
of acquired intangible assets included in cost of
revenue
|
7,327
|
6,369
|
26,621
|
24,604
|
Amortization
of acquired intangible assets
|
8,122
|
8,158
|
32,108
|
33,198
|
Acquisition-related
charges included in general and administrative costs
|
600
|
281
|
1,587
|
3,496
|
US
pension plan termination-related costs
|
-
|
-
|
285
|
-
|
Legal
settlement accrual
|
-
|
3,199
|
-
|
3,199
|
Restructuring
charges (credits), net
|
(358)
|
31,732
|
7,942
|
76,273
|
Non-GAAP operating income
(1)
|
$54,216
|
$31,610
|
$188,425
|
$172,729
|
|
|
|
|
|
GAAP
net income (loss)
|
$17,435
|
$(28,473)
|
$6,239
|
$(54,465)
|
Fair
value adjustment of acquired deferred revenue
|
495
|
885
|
2,713
|
3,469
|
Fair
value adjustment to deferred services cost
|
(108)
|
(114)
|
(437)
|
(492)
|
Stock-based
compensation
|
20,569
|
14,175
|
76,708
|
65,996
|
Amortization
of acquired intangible assets included in cost of
revenue
|
7,327
|
6,369
|
26,621
|
24,604
|
Amortization
of acquired intangible assets
|
8,122
|
8,158
|
32,108
|
33,198
|
Acquisition-related
charges included in general and administrative costs
|
600
|
281
|
1,587
|
3,496
|
US
pension plan termination-related costs
|
-
|
-
|
285
|
-
|
Legal
settlement accrual
|
-
|
3,199
|
-
|
3,199
|
Restructuring
charges (credits), net
|
(358)
|
31,732
|
7,942
|
76,273
|
Non-operating
credit facility refinancing costs
|
-
|
-
|
1,152
|
2,359
|
Income tax adjustments
(2)
|
(14,546)
|
(13,328)
|
(17,357)
|
(19,809)
|
Non-GAAP
net income
|
$39,536
|
$22,884
|
$137,561
|
$137,828
|
|
|
|
|
|
PTC Inc.
|
||||||||||
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED),
CONT'D.
|
||||||||||
(in thousands, except per share data)
|
|
Three Months Ended
|
Twelve Months Ended
|
||
|
September 30,
|
September 30,
|
September 30,
|
September 30,
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
GAAP
diluted earnings (loss) per share
|
$0.15
|
$(0.25)
|
$0.05
|
$(0.48)
|
Fair
value adjustment of acquired deferred revenue
|
-
|
0.01
|
0.02
|
0.03
|
Stock-based
compensation
|
0.18
|
0.12
|
0.65
|
0.57
|
Amortization
of acquired intangibles
|
0.13
|
0.12
|
0.50
|
0.50
|
Acquisition-related
charges
|
0.01
|
-
|
0.01
|
0.03
|
Legal
settlement accrual
|
-
|
0.03
|
-
|
0.03
|
Restructuring
charges (credits), net
|
-
|
0.27
|
0.07
|
0.66
|
Non-operating
credit facility refinancing costs
|
-
|
-
|
0.01
|
0.02
|
Income
tax adjustments
|
(0.12)
|
(0.11)
|
(0.15)
|
(0.17)
|
Non-GAAP
diluted earnings per share
|
$0.34
|
$0.20
|
$1.17
|
$1.19
|
|
|
|
|
|
GAAP
diluted weighted average shares outstanding
|
117,380
|
114,958
|
117,356
|
114,612
|
Dilutive
effect of stock-based compensation plans
|
-
|
1,522
|
-
|
985
|
Non-GAAP
diluted weighted average shares outstanding
|
117,380
|
116,480
|
117,356
|
115,597
|
|
|
|
|
|
|
(1)
|
Operating margin impact of non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Twelve Months Ended
|
||
|
September 30,
|
September 30,
|
September 30,
|
September 30,
|
|
2017
|
2016
|
2017
|
2016
|
GAAP
operating margin
|
5.7%
|
-11.5%
|
3.5%
|
-3.2%
|
Fair
value of acquired deferred revenue
|
0.2%
|
0.3%
|
0.2%
|
0.3%
|
Fair
value adjustment to deferred services cost
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
Stock-based
compensation
|
6.7%
|
4.9%
|
6.6%
|
5.8%
|
Amortization
of acquired intangibles
|
5.0%
|
5.0%
|
5.0%
|
5.1%
|
Acquisition-related
charges
|
0.2%
|
0.1%
|
0.1%
|
0.3%
|
US
pension plan termination-related costs
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
Legal
settlement accrual
|
0.0%
|
1.1%
|
0.0%
|
0.3%
|
Restructuring
charges (credits), net
|
-0.1%
|
11.0%
|
0.7%
|
6.7%
|
Non-GAAP
operating margin
|
17.7%
|
10.9%
|
16.1%
|
15.1%
|
|
(2)
|
We have recorded a full valuation allowance against our U.S. net
deferred tax assets and a valuation allowance against net deferred
tax assets in certain foreign jurisdictions. As we are profitable
on a non-GAAP basis, the 2017 and 2016 non-GAAP tax provisions are
being calculated assuming there is no valuation allowance. Income
tax adjustments reflect the tax effects of non-GAAP adjustments
which are calculated by applying the applicable tax rate by
jurisdiction to the non-GAAP adjustments listed above.
Additionally, we recorded a tax benefit in 2016 for the write-off
of a deferred tax liability that resulted from the change in tax
status of a foreign subsidiary. This tax benefit has been excluded
from non-GAAP tax expense.
|
PTC Inc.
|
|||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
|||
(in thousands)
|
|
September 30,
|
September 30,
|
|
2017
|
2016
|
|
|
|
ASSETS
|
|
|
|
|
|
Cash
and cash equivalents
|
$280,003
|
$277,935
|
Marketable
securities
|
50,315
|
49,616
|
Accounts
receivable, net
|
152,299
|
161,357
|
Property
and equipment, net
|
63,600
|
67,113
|
Goodwill
and acquired intangible assets, net
|
1,440,680
|
1,480,118
|
Other
assets
|
373,487
|
309,590
|
|
|
|
Total
assets
|
$2,360,384
|
$2,345,729
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Deferred
revenue
|
$458,907
|
$413,657
|
Debt,
net of deferred issuance costs
|
712,406
|
751,601
|
Other
liabilities
|
303,635
|
337,805
|
Stockholders'
equity
|
885,436
|
842,666
|
|
|
|
Total
liabilities and stockholders' equity
|
$2,360,384
|
$2,345,729
|
|
|
|
PTC Inc.
|
||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(in thousands)
|
|
Three Months Ended
|
Twelve Months Ended
|
||
|
September 30,
|
September 30,
|
September 30,
|
September 30,
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
Net
income (loss)
|
$17,435
|
$(28,473)
|
$6,239
|
$(54,465)
|
Stock-based
compensation
|
20,569
|
14,175
|
76,708
|
65,996
|
Depreciation
and amortization
|
22,555
|
21,833
|
86,742
|
86,554
|
Accounts
receivable
|
(22,081)
|
(5,882)
|
12,832
|
52,617
|
Accounts
payable and accruals
|
33,393
|
56,620
|
(14,531)
|
46,759
|
Deferred
revenue
|
(40,177)
|
(28,360)
|
5,808
|
16,232
|
Income
taxes
|
(11,255)
|
(19,963)
|
(29,087)
|
(37,433)
|
Excess
tax benefits from stock-based awards
|
(247)
|
1
|
(644)
|
(93)
|
Other
|
12,332
|
3,621
|
(9,477)
|
7,001
|
Net
cash provided by operating activities
|
32,524
|
13,572
|
134,590
|
183,168
|
|
|
|
|
|
Capital
expenditures
|
(6,111)
|
(9,557)
|
(25,444)
|
(26,189)
|
Acquisitions of businesses, net
of cash acquired (1)
|
-
|
(1,611)
|
(4,960)
|
(165,802)
|
Proceeds
(payments) on debt, net
|
-
|
(20,000)
|
(40,000)
|
90,000
|
Proceeds
from issuance of common stock
|
6,800
|
2
|
10,778
|
21
|
Payments of withholding taxes in connection with
|
|
|
|
|
vesting
of stock-based awards
|
(410)
|
(303)
|
(26,654)
|
(20,939)
|
Excess
tax benefits from stock-based awards
|
247
|
(1)
|
644
|
93
|
Proceeds
(purchases) of investments
|
-
|
(560)
|
15,218
|
(560)
|
Contingent
consideration
|
-
|
-
|
(11,054)
|
(10,621)
|
Proceeds
(purchases) of marketable securities, net
|
(208)
|
-
|
(941)
|
(44,605)
|
Repurchases
of common stock
|
(15,997)
|
-
|
(50,991)
|
-
|
Other
financing & investing activities
|
-
|
(96)
|
(184)
|
(6,855)
|
Foreign
exchange impact on cash
|
2,463
|
1,863
|
1,066
|
6,807
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
19,308
|
(16,691)
|
2,068
|
4,518
|
Cash
and cash equivalents, beginning of period
|
260,695
|
294,626
|
277,935
|
273,417
|
Cash
and cash equivalents, end of period
|
$280,003
|
$277,935
|
$280,003
|
$277,935
|
|
|
|
|
|
(1)
|
We acquired a company on April 5, 2017 for $5.0 million (net of
cash acquired). We aquired Kepware, Inc. on January 11, 2016 for
$99 million (net of cash acquired) and Vuforia on November 3, 2015
for $65 million (net of cash acquired).
|
Operating Measures
|
Guidance
|
Results
|
|
In
millions
|
Q4’17Low
|
Q4’17High
|
Actual
|
Subscription ACV
|
$41
|
$44
|
$52
|
License and Subscription Bookings
|
$120
|
$130
|
$144
|
Subscription % of Bookings
|
68%
|
68%
|
72%
|
Financial Measures
|
GAAP Guidance
|
GAAP Results
|
Non-GAAP Guidance
|
Non-GAAP Results
|
Non-GAAP at Guidance Mix(1)
|
||
In
millions, except per share amounts
|
Q4’17 Low
|
Q4’17 High
|
Q4’17 Low
|
Q4’17 High
|
|||
Subscription Revenue
|
$84
|
$86
|
$84
|
$84
|
$86
|
$84
|
$84
|
Support Revenue
|
$138
|
$138
|
$141
|
$138
|
$138
|
$141
|
$141
|
Perpetual License Revenue
|
$38
|
$41
|
$39
|
$38
|
$41
|
$39
|
$45
|
Software Revenue
|
$260
|
$265
|
$265
|
$260
|
$265
|
$265
|
$271
|
Professional Services Revenue
|
$43
|
$43
|
$42
|
$43
|
$43
|
$42
|
$42
|
Total Revenue
|
$303
|
$308
|
$306
|
$303
|
$308
|
$307
|
$313
|
Operating Expense
|
$195
|
$198
|
$206
|
$173
|
$176
|
$181
|
$180
|
Operating Margin
|
8%
|
9%
|
6%
|
18%
|
19%
|
18%
|
19%
|
Tax Rate
|
0%
|
0%
|
(220%)
|
10%
|
8%
|
6%
|
6%
|
EPS
|
$0.09
|
$0.14
|
$0.15
|
$0.33
|
$0.38
|
$0.34
|
$0.39
|
In
millions
|
Q4’17
|
YoY
|
YoY CC
|
FY’17
|
YoY
|
YoY CC
|
Management Comments
|
License and Subscription Bookings
|
$144
|
1%
|
(1%)
|
$419
|
4%
|
4%
|
● Q4'17 bookings of
$144M were well above the high end of our guidance range of
$120M-$130M, due to broad-based strength across our product
portfolio, strong regional performance in Europe and the Americas
(excluding the $20M booking from a mega-deal in Q4’16), and
sequential improvement in Japan.
● Excluding the $20M
booking from a mega-deal in Q4’16, Q4’17 bookings were
up 18% YoY (16% in CC) and FY’17 bookings were up 10% YoY
both as reported and in CC.
● For the full year,
CAD bookings grew 14%, far outpacing market growth. This was the
second consecutive year of double-digit, constant currency CAD
bookings growth. PLM grew 6%, in line with the market, and our IoT
business grew above the market growth rate of 30-40%.
|
Subscription ACV
|
$52
|
4%
|
2%
|
$143
|
25%
|
25%
|
● Q4'17 new
Subscription ACV of $52M was above the high end of our guidance
range of $41M-$44M.
FY’17 ACV
grew 25% YoY on strong bookings and continued adoption of our
subscription offerings around the globe.
|
Subscription % of Bookings
|
72%
|
3%
|
3%
|
69%
|
22%
|
22%
|
● Q4’17
subscription mix of 72% was above our guidance of 68% and was the
highest quarterly mix posted to date.
● FY’17
subscription mix of 69% increased 13 percentage points from 56% in
FY’16 (15 percentage points excluding the $20M booking from a
mega-deal in Q4’16).
● As previously
announced, we plan to discontinue new perpetual license sales in
the Americas and Western Europe as of January 1, 2018.
|
In
millions, except per share amounts
|
Q4’17
|
YoY
|
YoY CC
|
FY’17
|
YoY
|
YoY CC
|
Management Comments
|
Software
Revenue:
GAAP
Non-GAAP
|
$265
$265
|
10%
10%
|
9%
9%
|
$987
$989
|
5%
5%
|
5%
5%
|
● Software revenue
grew 10% YoY in Q4’17 and 5% YoY for FY’17 as we exited
the subscription trough, due to the success of our subscription
transition program, coupled with strong new bookings performance in
both FY’16 and FY’17.
|
Total
Revenue:
GAAP
Non-GAAP
|
$306
$307
|
6%
6%
|
5%
5%
|
$1,164
$1,167
|
2%
2%
|
2%
2%
|
● Total revenue grew
6% YoY in Q4 and 2% YoY for FY’17, which trailed software
revenue growth due to our strategy of further leveraging our
services partner ecosystem, which led to a 10% decline in
professional services revenue for FY’17.
|
EPS:
GAAP
Non-GAAP
|
$0.15
$0.34
|
160%
71%
|
173%
62%
|
$0.05
$1.17
|
111%
(2%)
|
105%
(4%)
|
● GAAP EPS improved
by $0.40 YoY in Q4 and $0.53 for the full year largely due to lower
restructuring costs and disciplined expense management, despite a
higher mix of subscription bookings in FY’17 vs.
FY’16.
● Non-GAAP EPS
improved by $0.14 YoY in Q4 and declined $0.02 for the full year.
Full year EPS was negatively impacted by a higher mix of
subscription bookings in FY’17 vs. FY’16 and a less
favorable tax rate.
|
In
millions
|
Q4’17
|
YoY
|
YoY CC
|
FY’17
|
YoY
|
YoY CC
|
Management Comments
|
Solutions Software Revenue
|
$239
|
10%
|
8%
|
$894
|
3%
|
3%
|
● Q4’17
Solutions software revenue growth was driven by strong bookings
contributions from CAD, PLM and our global channel, which grew
bookings in the high-teens. Higher subscription mix partially
offset the strong bookings performance.
● Quarterly software
revenue growth of 10% in Q4’17 was the first double-digit
growth quarter since Q3’14, prior to our move to a
subscription model.
● Full-year
FY’17 Solutions software revenue returned to growth,
evidencing our exit from the subscription trough, as the
subscription model transition accelerated.
|
IoT Software Revenue
|
$25
|
17%
|
17%
|
$94
|
29%
|
29%
|
● IoT Software
revenue growth was driven by continued adoption of our IoT
solutions, with IoT bookings growing above estimated market rates
of 30-40% for the fiscal year, partially offset by higher
subscription mix.
|
In
millions
|
Q4’17
|
YoY
|
YoYCC
|
FY’17
|
YoY
|
YoYCC
|
Management Comments
|
Americas Software Revenue
|
$112
|
9%
|
9%
|
$434
|
5%
|
4%
|
● Americas delivered
solid software revenue growth in FY’17 due to strong bookings
growth of 15% YoY for the full year, excluding the $20M Q4’16
SLM booking from a mega-deal, offset by a higher subscription
mix.
|
Europe Software Revenue
|
$100
|
16%
|
13%
|
$357
|
6%
|
7%
|
● Europe delivered
double-digit software revenue growth in Q4’17 and solid
results for FY’17 due to very strong bookings growth of 28%
in CC for the full year, offset by higher subscription
mix.
|
APAC Software Revenue
|
$52
|
4%
|
3%
|
$197
|
2%
|
0%
|
● APAC software
revenue grew modestly YoY for the quarter and was flat YoY in CC
despite a difficult bookings year, which was negatively impacted by
sales execution challenges in Japan.
● While Japan’s
bookings performance rebounded in Q4’17, growing 80%
sequentially to just under $8 million, APAC bookings were down 16%
for the year in CC.
|
In
millions
|
Q4’17
|
FY’17
|
Management Comments
|
Professional Services
Gross Margin:
GAAP
Non-GAAP
|
14%
18%
|
15%
18%
|
● Our professional
services business continues to deliver gross margins in-line with
our expectations as we continue to execute on our plan to achieve
our target margin of 20%, which we expect to achieve in
FY’18.
|
Operating
Expense:
GAAP
Non-GAAP
|
$206
$181
|
$794
$688
|
● Operating expenses
were slightly above the high end of our guidance range due
primarily to higher commissions incurred from the significant
bookings outperformance.
|
Operating
Margin:
GAAP
Non-GAAP
|
6%
18%
|
4%
16%
|
● Both GAAP and
non-GAAP operating margin improved year-over-year, despite a higher
subscription mix than last year, both for the quarter (72% vs. 70%)
and the fiscal year (69% vs. 56%), evidencing the positive impact
of our exit from the subscription trough.
|
Tax
Rate:
GAAP
Non-GAAP
|
(220%)
6%
|
544%
7%
|
● Our tax rate
includes a benefit of $8.2 million related to a release of a
valuation allowance in a foreign jurisdiction.
|
(in millions)
|
Q4’17 9/30/17
|
Q3’17 7/1/17
|
Q4’16 9/30/16
|
Q/Q
% Change
|
Y/Y
% Change
|
Billed
Deferred Revenue
|
$459
|
$465
|
$414
|
(1%)
|
11%
|
Unbilled
Deferred Revenue
|
$633
|
$443
|
$369
|
43%
|
72%
|
Total Deferred Revenue
|
$1,092
|
$909
|
$783
|
20%
|
40%
|
|
As Reported (Net)
|
Pro Forma (Gross)
|
(in millions)
|
Q4’17
|
Q4’17
|
Cash flows from operating activities:
|
9/30/17
|
9/30/17
|
Net
income
|
$17
|
$17
|
Stock-based
comp and D&A
|
43
|
43
|
Accounts
receivable
|
(22)
|
(22)
|
Deferred
revenue
|
(40)
|
(10)
|
Other
|
35
|
5
|
Net cash provided by operating activities
|
$33
|
$33
|
Q1’18 and FY’18 Operating Guidance
|
||||||||||
In
millions
|
Q1’18Low
|
Q1’18High
|
FY’18Low
|
FY’18High
|
Management Comments
|
|||||
Subscription ACV
|
$28
|
$31
|
$178
|
$185
|
● At the midpoint,
FY’18 guidance is up approximately 27% YoY based on continued
adoption of our subscription offerings and the discontinuation of
new perpetual license sales in the Americas and Western Europe
effective January 1, 2018.
● At the midpoint, Q1
guidance is up approximately 1% YoY. Last year Q1 included a $6M
ACV mega deal, and Q4’17 benefited from a $3M+ ACV deal that
closed early at the end of Q4 rather than in Q1’18 as
expected. This conversion deal is effective January 1, 2018. The
timing of these 2 large deals negatively impacts Q1’18 ACV
growth.
|
|||||
License and Subscription Bookings
|
$82
|
$92
|
$446
|
$464
|
● At the midpoint,
FY’18 guidance is up approximately 9% YoY and is up 11% YoY
at the high end. When factoring in the $7M conversion mega-deal
that closed early at the end of Q4’17 rather than in
Q1’18, the midpoint of guidance would be up approximately 12%
YoY and the high-end would have increased 14% YoY.
● At the midpoint, Q1
guidance is down approximately 3% YoY. Last year Q1 included a $12M
mega deal, and Q4’17 benefited from a $7M conversion deal
that closed early at the end of Q4 rather than in Q1’18, as
expected. This conversion is effective January 1, 2018. The timing
of these 2 large deals negatively impacts Q1’18 bookings
growth. Excluding these 2 large transaction, Q1 guidance is
consistent with historical quarterly patterns.
|
|||||
Subscription % of Bookings
|
68%
|
68%
|
80%
|
80%
|
● For FY’18, we
expect 80% of our bookings to be subscription vs. 69% in
FY’17, with subscription mix exiting the year at 85% in
Q4’18. The full-year FY’18 subscription mix guidance of
80% mix is modestly below our prior target, reflecting a more
cautious view of Japan performance as we continue to recover from
execution challenges. However, this modest reduction in the full
year mix does not impact our long-term model, due to our
over-performance in FY’16 and ’17 in ACV and our ending
FY’17 ARR.
● For Q1, we expect
68% of our bookings to be subscription, based on our current view
of the pipeline.
|
Q1’18 and FY’18 Financial Guidance
|
||||||||||
In
millions
|
Q1’18 Low
|
Q1’18 High
|
FY’18 Low
|
FY’18 High
|
Management Comments
|
|||||
Subscription Revenue
|
$98
|
$100
|
$440
|
$450
|
● At the midpoints,
FY’18 is up approximately 58% YoY and Q1 guidance is up
approximately 80% YoY based on the continued success of our
subscription transition and conversion programs.
● Note our
FY’18 subscription revenue guidance exceeds our subscription
bookings guidance by more than 20% for the first time in our
transition, illustrating the compounding benefit of a subscription
business model as it matures over time.
|
|||||
Support Revenue
|
$132
|
$132
|
$525
|
$525
|
● At the midpoints,
FY’18 is down approximately 9% YoY and Q1 guidance is down
approximately 13% YoY as fewer customers purchase perpetual
licenses and support in favor of our subscription offering, and
more customers have converted their perpetual licenses to
subscription.
|
|||||
Perpetual License Revenue
|
$27
|
$30
|
$90
|
$95
|
● At the midpoints,
FY’18 is down approximately 31% YoY and Q1 guidance is down
approximately 19% YoY as an increasing proportion of our customers
purchase software as a subscription.
● New perpetual
licenses will no longer be available for sale in the Americas and
Western Europe as of January 1, 2018, except for
Kepware.
|
|||||
Software Revenue
|
$257
|
$262
|
$1,055
|
$1,070
|
● We expect
FY’18 software revenue growth of approximately 7%-8%, driven
by strong subscription revenue growth, despite a higher anticipated
mix of subscription than in the prior year (FY’18 guidance of
80% vs. FY’17 mix of 69%). We expect recurring software
revenue growth of approximately 13-14%. We expect 91% of our
software revenue will be recurring in FY’18.
● At the midpoint, Q1
guidance is up approximately 8% driven by the increase in
subscription revenue as a result of the continued success of our
subscription transition and conversion programs. We expect
recurring software revenue growth of approximately
12%.
|
|||||
Professional Services Revenue
|
$40
|
$40
|
$170
|
$170
|
● At the midpoints,
FY’18 is down approximately 4% YoY and Q1 guidance is down
approximately 14% YoY because of fewer large services engagements
as we continue to emphasize more standard implementations of our
products, continue to execute on our strategy of growing our
service partner ecosystem, and focus on expanding our professional
services gross margins.
|
|||||
Total Revenue
|
$297
|
$302
|
$1,225
|
$1,240
|
● FY’18 is up
approximately 5%-6% YoY and Q1 guidance is up approximately 3%-5%
YoY on the continued success of our subscription transition and
conversion programs, improved execution in our core business and
growing momentum in the demand for our IoT solutions, offset by
planned lower professional services revenue.
|
In
millions
|
Q1’18Low
|
Q1’18High
|
FY’18Low
|
FY’18High
|
Management Comments
|
Operating
Expense:
GAAP
Non-GAAP
|
$199
$176
|
$202
$180
|
$814
$723
|
$824
$733
|
● FY18 non-GAAP
operating expense is up 5% to 6.5%. Consistent with our long-term
model, non-GAAP opex growth is targeted at about 50% of bookings
growth. We estimate that Fx drove a 140 bps increase in
opex.
● At the midpoints,
FY’18 GAAP operating expense is up approximately 3% YoY and
Q1’18 GAAP operating expense is approximately flat
YoY.
|
Operating
Margin:
GAAP
Non-GAAP
|
5%
16%
|
7%
17%
|
7%
17%
|
7%
18%
|
● At the midpoints,
FY’18 non-GAAP guidance is up approximately 140 bps YoY and
Q1’18 non-GAAP guidance is up approximately 110 bps YoY,
despite higher subscription mix guidance.
● At the midpoints,
FY’18 GAAP guidance is up approximately 350 bps YoY and
Q1’18 GAAP guidance is up approximately 440 bps YoY, despite
higher subscription mix guidance.
|
Tax
Rate:
GAAP
Non-GAAP
|
25%
11%
|
25%
9%
|
25%
11%
|
25%
9%
|
● Both GAAP and
non-GAAP guidance are based on current estimates.
|
Shares
Outstanding:
GAAP
Non-GAAP
|
117
117
|
117
117
|
117
117
|
117
117
|
● Both GAAP and
non-GAAP guidance are based on current estimates.
|
EPS:
GAAP
Non-GAAP
|
$0.03
$0.28
|
$0.05
$0.32
|
$0.24
$1.27
|
$0.30
$1.37
|
● At the midpoints,
FY’18 non-GAAP guidance is up approximately $0.15 or 13% YoY
and Q1 non-GAAP guidance is up approximately $0.04 or 13%
YoY.
● At the midpoints,
FY’18 GAAP guidance is up approximately $0.22 or 440% YoY and
Q1 GAAP guidance is an improvement of $0.12 YoY.
● Due to continued
execution and expense discipline, we expect EPS growth in
FY’18 despite a higher mix of subscription bookings, Fx
headwinds negatively impacting Opex and a less favorable tax rate
than in FY’17.
|
Free Cash Flow
|
|
|
$190
|
$200
|
● FCF guidance
includes approximately $40 million of capex in FY’18, up from
$25M in FY’17, primarily due to the buildout of our new
headquarters. We expect capex to decline to historical levels when
the buildout is complete, which we estimate to be in Q2 of
FY’19.
|
In
millions
|
Q1’18
|
FY’18
|
Effect
of acquisition accounting on fair value of acquired deferred
revenue
|
$
-
|
$
1
|
Stock-based
compensation expense
|
17
|
70
|
Intangible
asset amortization expense
|
15
|
58
|
Total Estimated GAAP adjustments
|
$ 32
|
$ 129
|
PTC Inc.
|
||||||||||
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
|
||||||||||
(in thousands, except per share data)
|
|
Three Months Ended
|
Twelve Months Ended
|
||
|
September 30,
|
September 30,
|
September 30,
|
September 30,
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
GAAP
revenue
|
$306,379
|
$288,237
|
$1,164,039
|
$1,140,533
|
Fair
value adjustment of acquired deferred subscription
revenue
|
240
|
619
|
1,670
|
2,330
|
Fair
value adjustment of acquired deferred services revenue
|
255
|
266
|
1,043
|
1,139
|
Non-GAAP
revenue
|
$306,874
|
$289,122
|
$1,166,752
|
$1,144,002
|
|
|
|
|
|
GAAP
gross margin
|
$223,574
|
$205,381
|
$835,020
|
$814,868
|
Fair
value adjustment of acquired deferred revenue
|
495
|
885
|
2,713
|
3,469
|
Fair
value adjustment to deferred services cost
|
(108)
|
(114)
|
(437)
|
(492)
|
Stock-based
compensation
|
3,519
|
2,556
|
12,611
|
10,791
|
Amortization
of acquired intangible assets included in cost of
revenue
|
7,327
|
6,369
|
26,621
|
24,604
|
Non-GAAP
gross margin
|
$234,807
|
$215,077
|
$876,528
|
$853,240
|
|
|
|
|
|
GAAP
operating income (loss)
|
$17,569
|
$(33,075)
|
$40,898
|
$(37,014)
|
Fair
value adjustment of acquired deferred revenue
|
495
|
885
|
2,713
|
3,469
|
Fair
value adjustment to deferred services cost
|
(108)
|
(114)
|
(437)
|
(492)
|
Stock-based
compensation
|
20,569
|
14,175
|
76,708
|
65,996
|
Amortization
of acquired intangible assets included in cost of
revenue
|
7,327
|
6,369
|
26,621
|
24,604
|
Amortization
of acquired intangible assets
|
8,122
|
8,158
|
32,108
|
33,198
|
Acquisition-related
charges included in general and administrative costs
|
600
|
281
|
1,587
|
3,496
|
US
pension plan termination-related costs
|
-
|
-
|
285
|
-
|
Legal
settlement accrual
|
-
|
3,199
|
-
|
3,199
|
Restructuring
charges (credits), net
|
(358)
|
31,732
|
7,942
|
76,273
|
Non-GAAP operating income
(1)
|
$54,216
|
$31,610
|
$188,425
|
$172,729
|
|
|
|
|
|
GAAP
net income (loss)
|
$17,435
|
$(28,473)
|
$6,239
|
$(54,465)
|
Fair
value adjustment of acquired deferred revenue
|
495
|
885
|
2,713
|
3,469
|
Fair
value adjustment to deferred services cost
|
(108)
|
(114)
|
(437)
|
(492)
|
Stock-based
compensation
|
20,569
|
14,175
|
76,708
|
65,996
|
Amortization
of acquired intangible assets included in cost of
revenue
|
7,327
|
6,369
|
26,621
|
24,604
|
Amortization
of acquired intangible assets
|
8,122
|
8,158
|
32,108
|
33,198
|
Acquisition-related
charges included in general and administrative costs
|
600
|
281
|
1,587
|
3,496
|
US
pension plan termination-related costs
|
-
|
-
|
285
|
-
|
Legal
settlement accrual
|
-
|
3,199
|
-
|
3,199
|
Restructuring
charges (credits), net
|
(358)
|
31,732
|
7,942
|
76,273
|
Non-operating
credit facility refinancing costs
|
-
|
-
|
1,152
|
2,359
|
Income tax adjustments
(2)
|
(14,546)
|
(13,328)
|
(17,357)
|
(19,809)
|
Non-GAAP
net income
|
$39,536
|
$22,884
|
$137,561
|
$137,828
|
|
|
|
|
|
PTC Inc.
|
||||||||||
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED),
CONT'D.
|
||||||||||
(in thousands, except per share data)
|
|
Three Months Ended
|
Twelve Months Ended
|
||
|
September 30,
|
September 30,
|
September 30,
|
September 30,
|
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
GAAP
diluted earnings (loss) per share
|
$0.15
|
$(0.25)
|
$0.05
|
$(0.48)
|
Fair
value adjustment of acquired deferred revenue
|
-
|
0.01
|
0.02
|
0.03
|
Stock-based
compensation
|
0.18
|
0.12
|
0.65
|
0.57
|
Amortization
of acquired intangibles
|
0.13
|
0.12
|
0.50
|
0.50
|
Acquisition-related
charges
|
0.01
|
-
|
0.01
|
0.03
|
Legal
settlement accrual
|
-
|
0.03
|
-
|
0.03
|
Restructuring
charges (credits), net
|
-
|
0.27
|
0.07
|
0.66
|
Non-operating
credit facility refinancing costs
|
-
|
-
|
0.01
|
0.02
|
Income
tax adjustments
|
(0.12)
|
(0.11)
|
(0.15)
|
(0.17)
|
Non-GAAP
diluted earnings per share
|
$0.34
|
$0.20
|
$1.17
|
$1.19
|
|
|
|
|
|
GAAP
diluted weighted average shares outstanding
|
117,380
|
114,958
|
117,356
|
114,612
|
Dilutive
effect of stock-based compensation plans
|
-
|
1,522
|
-
|
985
|
Non-GAAP
diluted weighted average shares outstanding
|
117,380
|
116,480
|
117,356
|
115,597
|
|
(1)
|
Operating margin impact of non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Twelve Months Ended
|
||
|
September 30,
|
September 30,
|
September 30,
|
September 30,
|
|
2017
|
2016
|
2017
|
2016
|
GAAP
operating margin
|
5.7%
|
-11.5%
|
3.5%
|
-3.2%
|
Fair
value of acquired deferred revenue
|
0.2%
|
0.3%
|
0.2%
|
0.3%
|
Fair
value adjustment to deferred services cost
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
Stock-based
compensation
|
6.7%
|
4.9%
|
6.6%
|
5.8%
|
Amortization
of acquired intangibles
|
5.0%
|
5.0%
|
5.0%
|
5.1%
|
Acquisition-related
charges
|
0.2%
|
0.1%
|
0.1%
|
0.3%
|
US
pension plan termination-related costs
|
0.0%
|
0.0%
|
0.0%
|
0.0%
|
Legal
settlement accrual
|
0.0%
|
1.1%
|
0.0%
|
0.3%
|
Restructuring
charges (credits), net
|
-0.1%
|
11.0%
|
0.7%
|
6.7%
|
Non-GAAP
operating margin
|
17.7%
|
10.9%
|
16.1%
|
15.1%
|
|
(2)
|
We have recorded a full valuation allowance against our U.S. net
deferred tax assets and a valuation allowance against net deferred
tax assets in certain foreign jurisdictions. As we are profitable
on a non-GAAP basis, the 2017 and 2016 non-GAAP tax provisions are
being calculated assuming there is no valuation allowance. Income
tax adjustments reflect the tax effects of non-GAAP adjustments
which are calculated by applying the applicable tax rate by
jurisdiction to the non-GAAP adjustments listed above.
Additionally, we recorded a tax benefit in 2016 for the write-off
of a deferred tax liability that resulted from the change in tax
status of a foreign subsidiary. This tax benefit has been excluded
from non-GAAP tax expense.
|