"In our third fiscal quarter, we again delivered strong results. We reported ARR growth of 9% and 15% on an organic constant currency basis. In addition, our recently acquired Codebeamer business had an outstanding quarter and added an additional point of ARR growth, taking constant currency ARR growth to 16%. In Q3, our cash from operations was $117 million, up 33% year over year, and our adjusted free cash flow was $132 million, up 23% year over year. The strength in Q3 was broad-based across all segments and geographic regions, driven by demand for digital transformation and SaaS," said James Heppelmann, President and CEO, PTC.
"Our differentiated product portfolio and leading SaaS capabilities position PTC to drive superior value for customers. Given the high resiliency of our business due to our subscription model coupled with our strong market position, as well as the strong execution of our teams, we are raising our key guidance measures for fiscal 2022 for the third time this year," concluded Heppelmann.
Third Quarter 2022 Highlights[1]
Key operating and financial highlights are set forth below. For additional details, please refer to the Q3'22 earnings presentation and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com. Revenue and, as a result, operating margin, operating profit, and earnings per share are impacted by revenue recognition under ASC 606.
- ARR as reported was $1,544 million at the end of Q3'22, up 9% compared to Q3'21, including $15 million related to the acquisition of Codebeamer. On a constant currency basis (including $16 million related to Codebeamer), ARR was $1,625 million, up 16%, compared to Q3'21. On an organic constant currency basis (excluding $16 million related to Codebeamer), ARR was $1,610 million, up 15% compared to Q3'21, and above guidance of $1,580 million to $1,595 million. Foreign exchange rate fluctuations had an $81 million negative impact on our Q3'22 reported ARR. ARR at the end of Q3'22 includes a $4 million reduction associated with discontinuing our business operations in Russia in Q2'22.
- Cash flow from operations was $117 million, free cash flow was $112 million, and adjusted free cash flow was $132 million in Q3'22, up compared to Q3'21 by 33%, 33%, and 23%, respectively. All three metrics were above guidance. In Q3'21, cash flow from operations was $88 million, free cash flow was $85 million, and adjusted free cash flow was $107 million.
- Revenue was $462 million in Q3'22, up 6% compared to Q3'21. On a constant currency basis, revenue was $480 million, up 12% compared to Q3'21.
- Operating margin was 17% in both Q3'22 and Q3'21. Non-GAAP operating margin in Q3'22 was 34%, compared to 31% in Q3'21.
- Earnings per share was $0.60 in Q3'22, compared to $0.43 in Q3'21. Non-GAAP earnings per share in Q3'22 was $0.97, compared to $0.83 in Q3'21.
- Total cash and cash equivalents as of the end of Q3'22 was $322 million. Gross debt was $1.43 billion as of the end of Q3'22. The increase in gross debt during Q3'22 was primarily due to financing the Codebeamer acquisition with our revolving credit facility, partially offset by repaying $105 million on our revolving credit facility.
[1] The definitions of our operating and non-GAAP financial measures and reconciliations of non-GAAP financial measures to comparable GAAP measures are included below and in the reconciliation tables at the end of this press release.
Fiscal 2022 and Q4'22 Guidance
"PTC delivered solid third quarter results. Based on our Q3 performance and our forecast for the remainder of the year, including the impact of Codebeamer and DxP, we are raising our ARR and free cash flow and adjusted free cash flow guidance for fiscal 2022. Due to foreign exchange headwinds, we are reducing our revenue guidance," said Kristian Talvitie, EVP and CFO, PTC.
"Despite the foreign exchange headwinds and the impact of exiting our business in Russia in Q2'22, our resilient business model, consistent execution, and operational discipline position us to deliver on our updated targets for the year," concluded Talvitie.
