PTC Surpasses Q4 Earnings and Revenue Estimates

Zacks Equity Research
·6-min read

PTC Inc. PTC reported fourth-quarter fiscal 2020 non-GAAP earnings of 78 cents per share, up 21.9% on a year-over-year basis. Also, the bottom line beat the Zacks Consensus Estimate by 39.3%.

Revenues came in at $391 million, up 16.7% year over year, driven by strength across Core and Growth product groups offset by decline in Focused Solutions Group (FSG). The top line surpassed the Zacks Consensus Estimate by 9.85%.

The company also announced the extension of its collaboration with Rockwell Automation ROK though 2023 to include PLM and Onshape products apart from Internet of things (IoT) and Augmented Realty (AR) solutions. Due to the expansion of the partnership, Rockwell Automation customers can avail PTC’s product lifecycle management and software as a service (SaaS) products while PTC’s customers can avail Rockwell Automation’s virtual machinery simulation and testing software.

PTC Inc. Price, Consensus and EPS Surprise

PTC Inc. Price, Consensus and EPS Surprise
PTC Inc. Price, Consensus and EPS Surprise

PTC Inc. price-consensus-eps-surprise-chart | PTC Inc. Quote

Top Line in Detail

Recurring revenues of $350 million increased 23.9% year over year. Perpetual license of $8.68 million declined 7.1% from the year-ago quarter’s figure due to end of perpetual license sales on Jan 1, 2019.

Revenues by License, Support and Services

License revenues (36% of total revenues) were $140.5 million, up 49% from the year-ago quarter’s figure.

Support and cloud services revenues (55.8%) of $218.3 million increased 10.4% year over year.

Professional services revenues (8.2%) of $32.2 million declined 25.2% year over year.

Revenues by Product Group

Revenues from Core Product Group — which includes computer-aided design (CAD) & Product Lifecycle Management (PLM) offerings — came in at $272 million, up 19% year over year (up 18% at constant currency or cc).

Revenues from Growth Product Group (which includes IoT, AR & Onshape) totaled $67 million, up 47% year over year (46% at cc).

Revenues from Focused Solutions Group (FSG) amounted to $52 million, down 15% year over year (down 16% at cc).

ARR Performance

Annualized recurring revenues (ARR) were $1.27 billion, up 14% year over year (up 11% at cc), driven by strong performance of Core and Growth divisions along with synergies from collaboration with Rockwell Automation.

ARR from Core Product Group (CAD & PLM) came in at $911 million, up 14% year over year (up 11% at cc). Growth was driven by strength in PLM.
ARR from Growth Product Group (IoT, AR & Onshape) came in at $181 million, up 34% year over year (32% at cc). Year-over-year growth can be attributed to improvement in AR as well as strength in Onshape.

ARR from FSG came in at $178 million, down 2% year over year (down 4% at cc). The low growth rate reflects weak demand trends across verticals like retail and travel that are badly hit by COVID-19 disruption.

Operating Details

Non-GAAP gross margin expanded 380 basis points (bps) on a year-over-year basis to 81.3%.

Total operating expenses increased 17.9% year over year to $239.4 million mainly due to higher general and administrative costs. 

Operating income on a non-GAAP basis increased 51% year over year to $123.7 million.

Consequently, operating margin on a non-GAAP basis expanded 720 bps on a year-over-year basis to 31.6%.

Balance Sheet & Cash Flow

As of Sep 30, cash, cash equivalents and marketable securities were $335 million compared with the prior-quarter’s figure of $435 million.

Total debt, net of deferred issuance costs, was $1 billion as of Sep 30,2020 down from the prior-quarter figure of $1.12 billion, as of Jun 27, 2020. Notably, the company has paid down $18 million of debt under its revolver facility in October 2020.

Cash provided by operating activities came in at $34 million compared with the prior-quarter’s figure of $104.5 million.

Free cash flow was $29.2 million compared with $99.3 million reported in the previous quarter.

Guidance

PTC anticipates near-term macroeconomic conditions to remain steady despite COVID-19 related disruptions. Management expects overall macroeconomic backdrop to start improving by the second half of fiscal 2021.

Fiscal 2021 revenues are projected between $1.55 billion and $1.6 billion.

The Zacks Consensus Estimate for revenues is currently pegged at $1.57 billion.

The company expects a moderating revenue growth in fiscal 2021 compared with fiscal 2020 owing to absence of impact of ASC 606 and related business policy modifications that aided fiscal 2020.

Further, non-GAAP earnings are expected between $2.65 and $2.85 per share which indicate rise of 3-11% year over year. The consensus mark for earnings is pegged at $2.90.

ARR is expected to be $1.385-$1.42 billion, which indicates rise of 9-12% year over year. ARR guidance is inclusive of 2% headwind stemming from reduced backlog at the end of fiscal 2020 owing to coronavirus related pressure on bookings.

Operating expenses are anticipated to increase 10% due to increases in headcount as well as higher variable compensation and marketing expenses.
Cash from operations is projected to be $365 million, indicating an increase of 55% on a year over year basis. Free cash flow is forecast to be $340 million, which suggests 60% year-over-year growth in fiscal 2021.

Further, non-GAAP operating margin is expected to be 28-29%.

Zacks Rank & Stocks to Consider

Currently, PTC carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Qorvo QRVO and Everbridge EVBG. While Qorvo sports a Zacks Rank #1 (Strong Buy), Everbridge carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Qorvo and Everbridge are scheduled to report earnings on Nov 4 and Nov 5, respectively.

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