Revenue and EPS Exceed High End of Guidance; Raises Revenue, EPS, and Free Cash Flow Guidance
NEEDHAM, Mass. — (BUSINESS WIRE) — April 18, 2018 — PTC (NASDAQ: PTC) today reported financial results for its fiscal second quarter ended March 31, 2018.
- Second quarter total revenue was $308 million
- Second quarter GAAP net income was $8 million or $0.07 per diluted share; non-GAAP net income was $40 million or $0.34 per diluted share
- Second quarter license and subscription bookings were $99 million and subscription mix was 78%
- Total deferred revenue, billed and unbilled, was $1.26 billion, an increase of 43% from the same period last year
- Second quarter subscription Annualized Recurring Revenue (ARR) was $453 million, an increase of $188 million or 71% from the same period last year
“Our second quarter results were a continuation of the strong performance we have been driving across our product portfolio,” said James Heppelmann, President and CEO, PTC. “Total revenue, operating margin and EPS all exceeded the high end of our guidance, and new bookings were at the midpoint of our guidance range.”
Heppelmann added, “We are pleased with our second quarter performance and are raising fiscal 2018 revenue, EPS and free cash flow guidance. For the first half of the fiscal year, CAD bookings grew double-digits, far outpacing market growth, PLM bookings grew at market, ThingWorx continued to set the standard for Industrial Innovation Platforms, and interest in our augmented reality (AR) solutions accelerated.”
Additional second quarter operating and financial highlights are set forth below. Information about our bookings and other reporting measures is provided beginning on page four. For additional details, please refer to the prepared remarks and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com.
- Q2’18 license and subscription bookings were $99 million, up 4% year over year, despite one large Q2 forecasted deal that did not close until the beginning of Q3. On a year-to-date basis, bookings were $203 million, up 10% year over year, and the subscription mix was 72%.
- Q2’18 GAAP software revenue was $262 million and non-GAAP software revenue was $263 million, an increase of 12% year over year in each case, despite a 700 basis point increase in the subscription mix compared to the same period last year.
- Approximately 91% of second quarter software revenue came from recurring revenue streams, up from 88% in the same period last year.
- Annualized Recurring Revenue (ARR) was $961 million, an increase of 15% year over year and the fifth consecutive quarter of double-digit growth.
- Total deferred revenue – billed and unbilled - increased $382 million or 43% year-over-year and increased $94 million or 8% sequentially to $1.26 billion. Billed deferred revenue increased 1% year-over year and 15% sequentially, to $498 million. Billed deferred revenue can fluctuate quarterly based upon the contractual billings dates in our recurring revenue contracts, as well as the timing of our fiscal reporting periods. Q2’18 ended on March 31st this year, as opposed to April 1st for Q2’17. Recurring revenue billings on April 1, 2018 were approximately $79 million, so had Q2’18 ended on April 1, billed deferred revenue would have grown approximately 17% year over year.
- GAAP professional services gross margin in the second quarter was 17% compared to 14% in the same period last year; non-GAAP professional services gross margin was 21% compared to 18% in the same period last year.
- GAAP operating margin in the second quarter was 7%, compared to 3% in the same period last year; non-GAAP operating margin was 18%, compared to 16% in the same period last year.
- Operating cash flows in the second quarter were $111 million compared to $76 million in the same period last year and free cash flow was $106 million compared to $69 million in the same period last year, an increase of 54%; second quarter operating cash flows and free cash flow include cash payments of approximately $1 million related to our October 2015 restructuring plan, compared to $13 million in the same period last year.
- Total cash, cash equivalents, and marketable securities as of the end of the second quarter were $355 million and total debt, net of deferred issuance costs, was $643 million. During the quarter, we repaid approximately $100 million of debt.
- As part of our previously announced share repurchase program, we plan to enter into a $100 million accelerated stock repurchase agreement on April 20, 2018, and expect that the repurchase will be completed by the end of our fiscal Q3 2018.
Fiscal 2018 Business Outlook
For
the third quarter and fiscal year ending September 30, 2018, the company
expects:
In millions except per share amounts | ||||||||||||
Operating Measures(1) |
Q3’18
|
Q3’18
|
FY’18
|
FY’18
|
||||||||
Subscription ACV | $ 44 | $ 48 | $ 182 | $ 190 | ||||||||
License and Subscription Bookings | $ 105 | $ 115 | $ 455 | $ 475 | ||||||||
Subscription % of Bookings | 83% | 83% | 80% | 80% | ||||||||
(1) An explanation of the metrics included in this table is provided below. |
||||||||||||
Financial Measures |
Q3’18
|
Q3’18
|
FY’18
|
FY’18
|
||||||||
Subscription Revenue | $ 128 | $ 130 | $ 475 | $ 480 | ||||||||
Support Revenue | 120 | 120 | 507 | 507 | ||||||||
Perpetual License Revenue | 17 | 20 | 92 | 97 | ||||||||
Total Software Revenue | 265 | 270 | 1,074 | 1,084 | ||||||||
Professional Services Revenue | 45 | 45 | 176 | 176 | ||||||||
Total Revenue | $ 310 | $ 315 | $ 1,250 | $ 1,260 | ||||||||
Operating Expense (GAAP) | $ 208 | $ 211 | $ 824 | $ 834 | ||||||||
Operating Expense (Non-GAAP) | 184 | 187 | 729 | 739 | ||||||||
Operating Margin (GAAP) | 5% | 7% | 7% | 7% | ||||||||
Operating Margin (Non-GAAP) | 16% | 17% | 17% | 18% | ||||||||
Tax Rate (GAAP) | 15% | 15% | 5% | 5% | ||||||||
Tax Rate (Non-GAAP) | 11% | 9% | 11% | 9% | ||||||||
Shares Outstanding (GAAP) | 118 | 118 | 118 | 118 | ||||||||
Shares Outstanding (Non-GAAP) | 118 | 118 | 118 | 118 | ||||||||
EPS (GAAP) | $ 0.04 | $ 0.07 | $ 0.31 | $ 0.38 | ||||||||
EPS (Non-GAAP) | $ 0.30 | $ 0.34 | $ 1.31 | $ 1.41 | ||||||||
Free Cash Flow | $ 210 | $ 220 | ||||||||||
Adjusted Free Cash Flow | $ 214 | $ 224 | ||||||||||
The third quarter and fiscal 2018 non-GAAP operating margin and non-GAAP EPS guidance exclude the estimated items outlined in the table below, as well as any tax effects and discrete tax items (which are not known nor reflected).
In millions |
Q3’18 |
FY’18 |
||
Effect of acquisition accounting on fair value of acquired deferred revenue | $ 0 | $ 1 | ||
Restructuring charges | - | (1) | ||
Headquarters relocation charges (1) | 2 | 5 | ||
Intangible asset amortization expense | 15 | 58 | ||
Stock-based compensation expense | 17 | 71 | ||
Total Estimated Pre-Tax GAAP adjustments | $ 34 | $ 134 | ||
(1) Represents accelerated depreciation expense recorded in anticipation of exiting our current headquarters facility. In 2019, we will be moving into a new worldwide headquarters in the Boston Seaport District and we will be vacating our current headquarters space. Because our current headquarters lease will not expire until November 2022, we are seeking to sublease that space. If we are unable to sublease our current headquarters space for an amount at least equal to our rent obligations under the current headquarters lease, we will bear overlapping rent obligations for those premises and will be required to record a charge related to any rent shortfall. A charge for such shortfall will be recorded in the earlier of the period that we cease using the space (which will likely occur in the second quarter of our fiscal 2019) or the period we exit the lease contract. Additionally, we will incur other costs associated with the move which will be recorded as incurred.
PTC’s Fiscal 2018 Second Quarter Results
Conference Call, Prepared Remarks and Data Tables
Prepared
remarks and financial data tables have been posted to the Investor
Relations section of our website at ptc.com. The Company will host a
management presentation to discuss results at 5:00 pm ET on Wednesday,
April 18, 2018. To access the live webcast, please visit PTC’s Investor
Relations website at investor.ptc.com at least 15 minutes before the
scheduled start time to download any necessary audio or plug-in
software. To participate in the live conference call, dial 773-799-3757
or 800-857-5592 and provide the passcode PTC. The call will be recorded
and a replay will be available for 10 days following the call by dialing
800-947-6766 and entering the pass code 7019. The archived webcast will
also be available on
PTC’s
Investor Relations website.
Bookings Metrics
We offer both
perpetual and subscription licensing options to our customers, as well
as monthly software rentals for certain products. Given the difference
in revenue recognition between the sale of a perpetual software license
(revenue is recognized at the time of sale) and a subscription (revenue
is deferred and recognized ratably over the subscription term), we use
bookings for internal planning, forecasting and reporting of new license
and cloud services transactions. In order to normalize between perpetual
and subscription licenses, we define subscription bookings as the
subscription annualized contract value (subscription ACV) of new
subscription bookings multiplied by a conversion factor of 2. We arrived
at the conversion factor of 2 by considering a number of variables
including pricing, support, length of term, and renewal rates. We define
subscription ACV as the total value of a new subscription booking
divided by the term of the contract (in days) multiplied by 365. If the
term of the subscription contract is less than a year, the ACV is equal
to the total contract value.
License and subscription bookings equal subscription bookings (as described above) plus perpetual license bookings plus any monthly software rental bookings during the period. Total ACV equals subscription ACV (as described above) plus the annualized value of incremental monthly software rental bookings during the period. Because subscription bookings is a metric we use to approximate the value of subscription sales if sold as perpetual licenses, it does not represent the actual revenue that will be recognized with respect to subscription sales or that would be recognized if the sales were perpetual licenses, nor does the annualized value of monthly software rental bookings represent the value of any such booking.
Total Deferred Revenue
Total
Deferred Revenue consists of Billed Deferred Revenue and Unbilled
Deferred Revenue. We define Unbilled Deferred Revenue as contractually
committed orders for license, subscription and support with a customer
for which the associated revenue has not been recognized and the
customer has not been invoiced. We do not record Unbilled Deferred
Revenue on our Consolidated Balance Sheet until we invoice the customer.
Billed Deferred Revenue primarily relates to software agreements
invoiced to customers for which the revenue has not yet been recognized.
Software Revenue
Any reference
to “total recurring software revenue” or “recurring software revenue”
means the sum of subscription revenue and support revenue. Any reference
to “total software revenue” or “software revenue” means the sum of
subscription revenue, support revenue and perpetual license revenue.
“Subscription revenue” includes cloud services revenue.
Navigate Allocation
Revenue and
bookings for Navigate, a ThingWorx-based IoT solution for PLM are
allocated 50% to Solutions and 50% to IoT.
Annualized Recurring Revenue (ARR)
To
help investors understand and assess the success of our subscription
transition, we provide an Annualized Recurring Revenue operating
measure. Annualized Recurring Revenue (ARR) for a given quarter is
calculated by dividing the portion of non-GAAP software revenue
attributable to subscription and support for the quarter by the number
of days in the quarter and multiplying by 365. (A related metric is
Subscription ARR, which is calculated by dividing the portion of
non-GAAP revenue attributable to subscription for the quarter by the
number of days in the quarter and multiplying by 365.) ARR should be
viewed independently of revenue and deferred revenue as it is an
operating measure and is not intended to be combined with or to replace
either of those items. ARR is not a forecast of future revenue, which
can be impacted by contract expiration and renewal rates, and does not
include revenue reported as perpetual license or professional services
revenue in our consolidated statement of income. Subscription and
support revenue and ARR disclosed in a quarter can be impacted by
multiple factors, including but not limited to (1) the timing of the
start of a contract or a renewal, including the impact of on-time
renewals, support win-backs, and support conversions, which may vary by
quarter, (2) the ramping of committed monthly payments under a
subscription agreement over time, and (3) multiple other contractual
factors with the customer including other elements sold with the
subscription or support contract. These factors can result in
variability in disclosed ARR.
Constant Currency Change Metric
Year-over-year
changes in revenue and bookings on a constant currency basis compare
reported results excluding the effect of any hedging converted into U.S.
dollars based on the corresponding prior year’s foreign currency
exchange rates to reported results for the comparable prior year period.
Important Information about Non-GAAP References
PTC
provides non-GAAP supplemental information to its financial results. We
use these non-GAAP 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 operating results. We
believe that these non-GAAP 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 measures affords investors a view of our operating results that
may be more easily compared to the results of peer companies. In
addition, compensation of our executives is based in part on the
performance of our business based on these non-GAAP measures. However,
non-GAAP information should not be construed as an alternative to GAAP
information as the items excluded from the non-GAAP measures often have
a material impact on PTC’s financial results and such items often recur.
Management uses, and investors should consider, non-GAAP measures in
conjunction with our GAAP results.
Non-GAAP revenue, non-GAAP operating expense, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income and non-GAAP EPS exclude the effect of the following items: fair value of acquired deferred revenue, fair value adjustment to deferred services cost, stock-based compensation, amortization of acquired intangible assets, acquisition-related charges included in general and administrative costs, restructuring charges, headquarters relocation charges, and income tax adjustments. Additional information about the items we exclude from our non-GAAP financial measures and the reasons we exclude them can be found in “Non-GAAP Financial Measures” beginning on page 33 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2017.
A reconciliation of non-GAAP measures to GAAP results is provided within this press release.
PTC also provides information on “free cash flow” and “adjusted free cash flow” to enable investors to assess our ability to generate cash without incurring additional external financings and to evaluate our performance against our announced long term goal of returning approximately 40% of our free cash flow to shareholders via stock repurchases. Free cash flow is net cash provided by (used in) operating activities less capital expenditures; adjusted free cash flow is free cash flow excluding restructuring payments and certain identified non-ordinary course payments. Free cash flow and adjusted free cash flow are not measures of cash available for discretionary expenditures.
Forward-Looking Statements
Statements
in this press release that are not historic facts, including statements
about our third quarter and full fiscal 2018 targets, and other future
financial and growth expectations and targets and anticipated tax rates,
and our plans to repurchase $100 million of our common stock in an
accelerated repurchase transaction in the third quarter, 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 deteriorate; customers may not purchase our solutions or
convert to subscription when or at the rates we expect; our businesses,
including our Internet of Things (IoT) business, may not expand and/or
generate the revenue we expect; foreign currency exchange rates may vary
from our expectations and thereby affect our reported revenue and
expense; the mix of revenue between license & subscription solutions,
support and professional services could be different than we expect,
which could impact our EPS results; our transition to subscription-only
licensing in the Americas and Western Europe could adversely affect
sales and revenue; sales of our solutions as subscriptions may not have
the longer-term effect on revenue and earnings that we expect; we may be
unable to expand our partner ecosystem as we expect and our partners may
not generate the revenue we expect; we may be unable to improve
performance in Japan when or as we expect; we may be unable to generate
sufficient operating cash flow to return 40% of free cash flow to
shareholders and other uses of cash or our credit facility limits or
other matters could preclude share repurchases. 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. Other
risks and uncertainties that could cause actual results to differ
materially from those projected are detailed from time to time in
reports we file with the Securities and Exchange Commission, including
our most recent Annual Report on Form 10-K and Quarterly Reports on Form
10-Q.
PTC and the PTC logo are trademarks or registered trademarks of PTC Inc. or its subsidiaries in the United States and in other countries.
About PTC (NASDAQ:
PTC)
PTC
helps companies around the world reinvent the way they design,
manufacture, operate, and service things in and for a smart, connected
world. In 1986 we revolutionized digital 3D design, and in 1998 were
first to market with Internet-based product lifecycle management. Today,
our leading industrial innovation platform and field-proven solutions
enable you to unlock value at the convergence of the physical and
digital worlds. With PTC, manufacturers and an ecosystem of partners and
developers can capitalize on the promise of the Internet of Things and
augmented reality technology today and drive the future of innovation.
PTC Inc. | ||||||||||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
March 31, | April 1, | March 31, | April 1, | |||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Revenue: | ||||||||||||||||||||||
Subscription | $ | 112,931 | $ | 65,780 | $ | 212,939 | $ | 120,142 | ||||||||||||||
Support | 126,683 | 141,718 | 257,880 | 293,196 | ||||||||||||||||||
Total recurring revenue | 239,614 | 207,498 | 470,819 | 413,338 | ||||||||||||||||||
Perpetual license | 22,839 | 27,372 | 56,824 | 61,751 | ||||||||||||||||||
Total subscription, support and license revenue | 262,453 | 234,870 | 527,643 | 475,089 | ||||||||||||||||||
Professional services | 45,430 | 45,170 | 86,884 | 91,278 | ||||||||||||||||||
Total revenue | 307,883 | 280,040 | 614,527 | 566,367 | ||||||||||||||||||
Cost of revenue: | ||||||||||||||||||||||
Cost of license and subscription revenue (1) (2) | 23,119 | 20,555 | 47,495 | 40,685 | ||||||||||||||||||
Cost of support revenue (1) (2) | 23,030 | 22,576 | 45,230 | 45,393 | ||||||||||||||||||
Total cost of software revenue | 46,149 | 43,131 | 92,725 | 86,078 | ||||||||||||||||||
Cost of professional services revenue(1) | 37,482 | 38,699 | 73,864 | 77,867 | ||||||||||||||||||
Total cost of revenue | 83,631 | 81,830 | 166,589 | 163,945 | ||||||||||||||||||
Gross margin | 224,252 | 198,210 | 447,938 | 402,422 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||
Sales and marketing (1) | 98,330 | 87,777 | 197,645 | 178,467 | ||||||||||||||||||
Research and development (1) | 62,194 | 57,710 | 126,163 | 115,624 | ||||||||||||||||||
General and administrative (1) | 33,353 | 36,800 | 68,357 | 73,495 | ||||||||||||||||||
Amortization of acquired intangible assets | 7,895 | 7,946 | 15,716 | 16,013 | ||||||||||||||||||
Restructuring and headquarters charges, net (3) | 114 | 464 | 219 | 6,749 | ||||||||||||||||||
Total operating expenses | 201,886 | 190,697 | 408,100 | 390,348 | ||||||||||||||||||
Operating income | 22,366 | 7,513 | 39,838 | 12,074 | ||||||||||||||||||
Other expense, net | (10,820 | ) | (8,569 | ) | (21,821 | ) | (19,633 | ) | ||||||||||||||
Income (loss) before income taxes | 11,546 | (1,056 | ) | 18,017 | (7,559 | ) | ||||||||||||||||
Provision (benefit) for income taxes (4) | 3,624 | 48 | (3,782 | ) | 2,686 | |||||||||||||||||
Net income (loss) | $ | 7,922 | $ | (1,104 | ) | $ | 21,799 | $ | (10,245 | ) | ||||||||||||
Earnings (loss) per share: | ||||||||||||||||||||||
Basic | $ | 0.07 | $ | (0.01 | ) | $ | 0.19 | $ | (0.09 | ) | ||||||||||||
Weighted average shares outstanding | 116,241 | 115,709 | 115,986 | 115,498 | ||||||||||||||||||
Diluted | $ | 0.07 | $ | (0.01 | ) | $ | 0.19 | $ | (0.09 | ) | ||||||||||||
Weighted average shares outstanding | 117,905 | 115,709 | 117,780 | 115,498 | ||||||||||||||||||
(1) | The amounts in the tables above include stock-based compensation as follows: | |||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
March 31, | April 1, | March 31, | April 1, | |||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
Cost of license and subscription revenue | $ | 408 | $ | 314 | $ | 821 | $ | 607 | ||||||||||||||
Cost of support | 690 | 1,355 | 1,498 | 2,499 | ||||||||||||||||||
Cost of professional services revenue | 1,669 | 1,538 | 3,375 | 2,995 | ||||||||||||||||||
Sales and marketing | 5,038 | 4,130 | 9,917 | 7,751 | ||||||||||||||||||
Research and development | 3,383 | 3,951 | 6,343 | 6,948 | ||||||||||||||||||
General and administrative | 5,838 | 10,289 | 13,403 | 18,765 | ||||||||||||||||||
Total stock-based compensation | $ | 17,026 | $ | 21,577 | $ | 35,357 | $ | 39,565 | ||||||||||||||
(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) Headquarters relocation charges represent accelerated depreciation expense recorded in anticipation of the exit of our current headquarters facility.
(4) Our 2018 year-to-date tax rate includes a benefit of $7 million relating to the enactment of the Tax Cuts and Jobs Act.
PTC Inc. | ||||||||||||||||||||||
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED) | ||||||||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
March 31, | April 1, | March 31, | April 1, | |||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
GAAP revenue | $ | 307,883 | $ | 280,040 | $ | 614,527 | $ | 566,367 | ||||||||||||||
Fair value adjustment of acquired deferred subscription revenue | 75 | 411 | 191 | 1,057 | ||||||||||||||||||
Fair value adjustment of acquired deferred services revenue | 233 | 262 | 480 | 530 | ||||||||||||||||||
Non-GAAP revenue | $ | 308,191 | $ | 280,713 | $ | 615,198 | $ | 567,954 | ||||||||||||||
GAAP gross margin | $ | 224,252 | $ | 198,210 | $ | 447,938 | $ | 402,422 | ||||||||||||||
Fair value adjustment of acquired deferred revenue | 308 | 673 | 671 | 1,587 | ||||||||||||||||||
Fair value adjustment to deferred services cost | (96 | ) | (108 | ) | (200 | ) | (221 | ) | ||||||||||||||
Stock-based compensation | 2,767 | 3,207 | 5,694 | 6,101 | ||||||||||||||||||
Amortization of acquired intangible assets included in cost of revenue | 6,556 | 6,389 | 13,231 | 12,777 | ||||||||||||||||||
Non-GAAP gross margin | $ | 233,787 | $ | 208,371 | $ | 467,334 | $ | 422,666 | ||||||||||||||
GAAP operating income | $ | 22,366 | $ | 7,513 | $ | 39,838 | $ | 12,074 | ||||||||||||||
Fair value adjustment of acquired deferred revenue | 308 | 673 | 671 | 1,587 | ||||||||||||||||||
Fair value adjustment to deferred services cost | (96 | ) | (108 | ) | (200 | ) | (221 | ) | ||||||||||||||
Stock-based compensation | 17,026 | 21,577 | 35,357 | 39,565 | ||||||||||||||||||
Amortization of acquired intangible assets included in cost of revenue | 6,556 | 6,389 | 13,231 | 12,777 | ||||||||||||||||||
Amortization of acquired intangible assets | 7,895 | 7,946 | 15,716 | 16,013 | ||||||||||||||||||
Acquisition-related charges included in general and administrative costs | 133 | 554 | 140 | 723 | ||||||||||||||||||
Restructuring charges, net | (839 | ) | 464 | (734 | ) | 6,749 | ||||||||||||||||
Headquarters relocation charges | 953 | - | 953 | - | ||||||||||||||||||
Non-GAAP operating income (1) | $ | 54,302 | $ | 45,008 | $ | 104,972 | $ | 89,267 | ||||||||||||||
GAAP net income (loss) | $ | 7,922 | $ | (1,104 | ) | $ | 21,799 | $ | (10,245 | ) | ||||||||||||
Fair value adjustment of acquired deferred revenue | 308 | 673 | 671 | 1,587 | ||||||||||||||||||
Fair value adjustment to deferred services cost | (96 | ) | (108 | ) | (200 | ) | (221 | ) | ||||||||||||||
Stock-based compensation | 17,026 | 21,577 | 35,357 | 39,565 | ||||||||||||||||||
Amortization of acquired intangible assets included in cost of revenue | 6,556 | 6,389 | 13,231 | 12,777 | ||||||||||||||||||
Amortization of acquired intangible assets | 7,895 | 7,946 | 15,716 | 16,013 | ||||||||||||||||||
Acquisition-related charges included in general and administrative costs | 133 | 554 | 140 | 723 | ||||||||||||||||||
Restructuring charges, net | (839 | ) | 464 | (734 | ) | 6,749 | ||||||||||||||||
Headquarters relocation charges | 953 | - | 953 | - | ||||||||||||||||||
Non-operating credit facility refinancing costs | - | 1,152 | - | 1,152 | ||||||||||||||||||
Income tax adjustments (2) | (80 | ) | (2,787 | ) | (11,080 | ) | (2,639 | ) | ||||||||||||||
Non-GAAP net income | $ | 39,778 | $ | 34,756 | $ | 75,853 | $ | 65,461 | ||||||||||||||
GAAP diluted earnings (loss) per share | $ | 0.07 | $ | (0.01 | ) | $ | 0.19 | $ | (0.09 | ) | ||||||||||||
Fair value adjustment of acquired deferred revenue | - | 0.01 | 0.01 | 0.01 | ||||||||||||||||||
Stock-based compensation | 0.14 | 0.18 | 0.30 | 0.34 | ||||||||||||||||||
Amortization of acquired intangibles | 0.12 | 0.12 | 0.25 | 0.25 | ||||||||||||||||||
Acquisition-related charges | - | - | - | 0.01 | ||||||||||||||||||
Restructuring charges, net | (0.01 | ) | - | (0.01 | ) | 0.06 | ||||||||||||||||
Headquarters relocation charges | 0.01 | - | 0.01 | - | ||||||||||||||||||
Non-operating credit facility refinancing costs | 0.01 | - | 0.01 | |||||||||||||||||||
Income tax adjustments | - | (0.02 | ) | (0.09 | ) | (0.02 | ) | |||||||||||||||
Non-GAAP diluted earnings per share | $ | 0.34 | $ | 0.30 | $ | 0.64 | $ | 0.56 | ||||||||||||||
GAAP diluted weighted average shares outstanding | 117,905 | 115,709 | 117,780 | 115,498 | ||||||||||||||||||
Dilutive effect of stock-based compensation plans | - | 1,737 | - | 1,736 | ||||||||||||||||||
Non-GAAP diluted weighted average shares outstanding | 117,905 | 117,446 | 117,780 | 117,234 | ||||||||||||||||||
(1) | Operating margin impact of non-GAAP adjustments: | |||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
March 31, | April 1, | March 31, | April 1, | |||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||
GAAP operating margin | 7.3 | % | 2.7 | % | 6.5 | % | 2.1 | % | ||||||||||||||
Fair value of acquired deferred revenue | 0.1 | % | 0.2 | % | 0.1 | % | 0.3 | % | ||||||||||||||
Fair value adjustment to deferred services cost | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||||||
Stock-based compensation | 5.5 | % | 7.7 | % | 5.8 | % | 7.0 | % | ||||||||||||||
Amortization of acquired intangibles | 4.7 | % | 5.1 | % | 4.7 | % | 5.1 | % | ||||||||||||||
Acquisition-related charges | 0.0 | % | 0.2 | % | 0.0 | % | 0.1 | % | ||||||||||||||
Restructuring charges, net | -0.3 | % | 0.2 | % | -0.1 | % | 1.2 | % | ||||||||||||||
Headquarters relocation charges | 0.3 | % | 0.0 | % | 0.2 | % | 0.0 | % | ||||||||||||||
Non-GAAP operating margin | 17.6 | % | 16.0 | % | 17.1 | % | 15.7 | % | ||||||||||||||
(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 2018 and 2017 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. We have recorded the impact of the Tax Cuts and Jobs Act in our Q1'18 GAAP earnings, resulting in a non-cash benefit of approximately $7 million. We have excluded this benefit from our non-GAAP results.
PTC Inc. | ||||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands) | ||||||||
March 31, | September 30, | |||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 299,776 | $ | 280,003 | ||||
Marketable securities | 55,264 | 50,315 | ||||||
Accounts receivable, net | 127,151 | 152,299 | ||||||
Property and equipment, net | 59,210 | 63,600 | ||||||
Goodwill and acquired intangible assets, net | 1,421,633 | 1,440,680 | ||||||
Other assets | 365,780 | 373,487 | ||||||
Total assets | $ | 2,328,814 | $ | 2,360,384 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Deferred revenue | $ | 497,777 | $ | 458,907 | ||||
Debt, net of deferred issuance costs | 642,837 | 712,406 | ||||||
Other liabilities | 260,476 | 303,635 | ||||||
Stockholders' equity | 927,724 | 885,436 | ||||||
Total liabilities and stockholders' equity | $ | 2,328,814 | $ | 2,360,384 | ||||
PTC Inc. | |||||||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||
(in thousands) | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
March 31, | April 1, | March 31, |
April 1, |
||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||||
Net income (loss) | $ | 7,922 | $ | (1,104 | ) | $ | 21,799 | $ | (10,245 | ) | |||||||||||
Stock-based compensation | 17,026 | 21,577 | 35,357 | 39,565 | |||||||||||||||||
Depreciation and amortization | 21,681 | 21,229 | 42,727 | 42,683 | |||||||||||||||||
Accounts receivable | 10,424 | (5,811 | ) | 32,027 | 15,373 | ||||||||||||||||
Accounts payable and accruals | 13,927 | 13,022 | (39,130 | ) | (40,586 | ) | |||||||||||||||
Deferred revenue | 36,972 | 39,183 | 59,027 | 27,457 | |||||||||||||||||
Income taxes | 138 | (8,584 | ) | (14,134 | ) | (14,680 | ) | ||||||||||||||
Other | 3,058 | (3,086 | ) | (1,398 | ) | (31,017 | ) | ||||||||||||||
Net cash provided by operating activities (1) | 111,148 | 76,426 | 136,275 | 28,550 | |||||||||||||||||
Capital expenditures | (4,762 | ) | (7,689 | ) | (11,139 | ) | (14,789 | ) | |||||||||||||
Acquisition of businesses, net of cash acquired | (3,000 | ) | - | (3,000 | ) | - | |||||||||||||||
Purchase of intangible asset | (500 | ) | - | (3,000 | ) | - | |||||||||||||||
Proceeds (payments) on debt, net | (100,000 | ) | (20,000 | ) | (70,000 | ) | (40,000 | ) | |||||||||||||
Proceeds from issuance of common stock | 7,472 | 3,978 | 7,472 | 3,978 | |||||||||||||||||
Payments of withholding taxes in connection with | |||||||||||||||||||||
vesting of stock-based awards | (454 | ) | (543 | ) | (33,942 | ) | (19,166 | ) | |||||||||||||
Proceeds from investments | - | 13,716 | - | 15,218 | |||||||||||||||||
Contingent consideration | - | - | (3,176 | ) | (2,711 | ) | |||||||||||||||
Purchases of marketable securities, net | (5,046 | ) | 1,280 | (5,554 | ) | 1,280 | |||||||||||||||
Other financing & investing activities | - | (184 | ) | - | (184 | ) | |||||||||||||||
Foreign exchange impact on cash | 3,239 | 2,965 | 5,837 | (6,795 | ) | ||||||||||||||||
Net change in cash and cash equivalents | 8,097 | 69,949 | 19,773 | (34,619 | ) | ||||||||||||||||
Cash and cash equivalents, beginning of period | 291,679 | 173,367 | 280,003 | 277,935 | |||||||||||||||||
Cash and cash equivalents, end of period | $ | 299,776 | $ | 243,316 | $ | 299,776 | $ | 243,316 | |||||||||||||
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(1) Effective the beginning of fiscal 2018, in accordance with the adoption of ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," excess tax benefits are now classified as an operating activity on the statement of cash flows rather than as a financing activity. The prior period excess tax benefits have been reclassified for comparability.
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or
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