NEEDHAM, MA, Apr 21, 2016 – PTC has reported financial results for the second quarter ended April 2, 2016.
Q2 Fiscal 2016 Overview
Second quarter FY’16 GAAP revenue was $273 million; non-GAAP revenue was $274 million. GAAP net loss was $5 million or $0.05 per share; non-GAAP net income was $26 million or $0.23 per share.
PTC stock trends for the past 6 months (picture from PTC IR Website)
As compared to the second quarter of FY’15, currency negatively impacted revenue by approximately $9 million and negatively impacted non-GAAP EPS by approximately $0.01 per share.
James Heppelmann, president and CEO said, “We were very pleased with our execution in Q2. Bookings exceeded the high-end of guidance, adoption of our subscription licensing model accelerated, support conversions to subscription accelerated sequentially, and we continued to gain traction in our IoT business.” Heppelmann added, “While a higher subscription mix negatively impacts near-term reported revenue and earnings, we believe significant long-term value will be created for our customers and shareholders by transitioning to a subscription model. Importantly, we remain committed to our track record of financial discipline, and when viewed on a mix-adjusted basis, according to our model, both our Q2 revenue and earnings per share would have exceeded the high end of our guidance range.”
Comparative analysis based on PTC’s financial results in the last 12 quarters (Source PTC website)
Operational Overview
For additional details, please refer to the prepared remarks and financial data tables that have been posted to the Investor Relations section of their website at ptc.com. Selected remarks from PTC are set out below.
Comparative analysis based on PTC’s financial results in the last 12 quarters (Source PTC website)
- License and subscription bookings were $86 million; above the high end of the guidance range of $71 million to $81 million.
- For the quarter, subscription bookings were approximately 54% of total bookings, well above their guidance assumption of 26% and up from 14% a year ago. Based upon their model, this higher than guidance mix of subscription in the quarter, while expected to be positive long-term, reduced perpetual license revenue by approximately $24 million and reduced non-GAAP EPS by approximately $0.16 as compared to their guidance. As a rule of thumb, their model indicates that, on an annual basis, every 1% change in subscription mix will impact annual revenue by $3 million, and annual non-GAAP EPS by$0.02.
- Total subscription annualized contract value (ACV) was $23 million; above guidance of $10 million.
- Software revenue, which reflects a higher mix of subscription than last year, was down approximately$24 million or 9% on a year-over-year, constant currency basis. Their model indicates that the higher mix of subscription than last year lowered Q2’16 software revenue by approximately $30 million.
- Annualized recurring revenue (ARR) was approximately $742 million at the end of the second quarter of fiscal 2016.
- GAAP operating expenses were approximately $191 million; non-GAAP operating expenses were approximately $164 million. These results were at the low end of both the GAAP and non-GAAP guidance ranges.
- Q2’16 GAAP operating margin was 1% and non-GAAP operating margin was 14%. Q2’15 GAAP operating margin was 1% and non-GAAP operating margin was 23%. Based on their model, the higher mix of subscription in Q2’16 reduced Q2’16 non-GAAP operating margin by approximately 700 basis points as compared to guidance.
- For Q2’16, they recorded a GAAP income tax expense of $1.6 million, or $0.01 per share and a non-GAAP income tax expense of $6.8 million, or $0.06 per share. The non-GAAP tax rate for the quarter was 21%.
- Cash flow from operations was $49 million. Excluding $28 million paid in February in connection with the SEC and DOJ FCPA investigation related to their China business and $25 million paid in connection with the restructuring announced in October 2015, cash provided by operations for Q2’16 was $102 million and free cash flow was $97 million. They did not purchase any shares in Q2’16, as their share repurchases are planned for the second half of FY’16.
- PTC ended the quarter with total cash and cash equivalents of $368 million and total debt of $838 million.
Workforce Realignment
In October 2015, reflecting a realignment of resources toward higher growth opportunities and their commitment to operating margin improvement, they announced a plan to repurpose or eliminate approximately 8% of worldwide positions and to consolidate select facilities. This is expected to result in a restructuring charge of up to $50 million; of which $37 million was recorded in Q1’16 and $5 million was recorded in Q2’16, with the remainder expected to be recorded in Q3 and Q4 of FY’16. Substantially all of the charges are attributable to termination benefits, most of which will be paid in FY’16.
FY’16 Business Outlook
For the quarter ending July 2, 2016 and fiscal year 2016, the company expects:
| ($ in millions) | Q3’16 Low |
Q3’16 High |
FY’16 Low |
FY’16 High |
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| Subscription ACV(1) | $ | 22 | $ | 24 | $ | 79 | $ | 84 | |||||||||
| License and Subscription Bookings(1) | 90 | 100 | 357 | 377 | |||||||||||||
| Subscription % of Bookings(1) | 48 | % | 48 | % | 44 | % | 44 | % | |||||||||
| Subscription Revenue | $ | 32 | $ | 32 | $ | 115 | $ | 116 | |||||||||
| Support Revenue | 159 | 159 | 649 | 650 | |||||||||||||
| Perpetual License Revenue | 47 | 52 | 200 | 212 | |||||||||||||
| Total Software Revenue | 238 | 243 | 964 | 978 | |||||||||||||
| Professional Services Revenue | 49 | 49 | 196 | 197 | |||||||||||||
| Total Revenue | $ | 287 | $ | 292 | $ | 1,160 | $ | 1,175 | |||||||||
| Operating Expense (GAAP) | $ | 196 | $ | 198 | $ | 798 | $ | 802 | |||||||||
| Operating Expense (Non-GAAP) | 167 | 169 | 656 | 660 | |||||||||||||
| Operating Margin (GAAP) | 2 | % | 4 | % | 3 | % | 4 | % | |||||||||
| Operating Margin (Non-GAAP) | 16 | % | 17 | % | 18 | % | 19 | % | |||||||||
| Tax Rate (GAAP) | 10 | % | 8 | % | 10 | % | 0 | % | |||||||||
| Tax Rate (Non-GAAP) | 10 | % | 8 | % | 10 | % | 8 | % | |||||||||
| Shares Outstanding | 116 | 116 | 116 | 116 | |||||||||||||
| EPS (GAAP) | $ | 0.01 | $ | 0.06 | $ | 0.11 | $ | 0.18 | |||||||||
| EPS (Non-GAAP) | $ | 0.31 | $ | 0.36 | $ | 1.52 | $ | 1.62 | |||||||||
| Free Cash Flow(2) | $ | 215 | $ | 225 | |||||||||||||
(1)Explanation of these metrics is provided below.
(2)Free Cash Flow guidance is net cash provided by (used in) operating activities less capital expenditures, and excludes previously announced restructuring payments of approximately $50 million and the $28 million legal settlement in connection with the SEC and DOJ FCPA investigation related to their China business.
The Q3’16 and full year FY’16 non-GAAP operating margin and non-GAAP EPS guidance exclude the estimated items outlined in the table below and their income tax effects, as well as any discrete tax items (which are not known or reflected). Additionally, the company is currently reviewing its financing structure and considering refinancing opportunities in the credit and debt markets; their guidance excludes the potential impact of any such potential refinancing.
| ($ in millions) | Q3’16 | FY’16 | |||||
| Effect of acquisition accounting on fair value of acquired deferred revenue | $ | 1 | $ | 3 | |||
| Stock-based compensation expense | 14 | 66 | |||||
| Intangible asset amortization expense | 15 | 58 | |||||
| Acquisition-related charges | 0 | 2 | |||||
| Restructuring charges | 8 | 50 | |||||
| Non-operating credit facility refinancing costs | – | 2 | |||||
| Total Estimated GAAP adjustments | $ | 38 | $ | 182 | |||
Numbers may not sum due to rounding.
PTC’s Second Quarter FY’16 Results Conference Call, Prepared Remarks and Financial Data Tables
Prepared remarks for the conference call and financial data tables have been posted to the Investor Relations section of their website at ptc.com. The Company will host a management presentation to discuss results at 5:00PM ET on Wednesday, April 20, 2016. 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 8008575592 or 7737993757 and provide the passcode PTC. The call will be recorded and a replay will be available for 10 days following the call by dialing 888-567-0385 and entering the pass code 1321. The archived webcast will also be available on PTC’s Investor Relations website.
Bookings Metrics
They offer both perpetual and subscription licensing options to their 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), they use bookings for internal planning, forecasting and reporting of new license and cloud services transactions. In order to normalize between perpetual and subscription licenses, they define subscription bookings as the subscription annualized contract value (subscription ACV) of new subscription bookings multiplied by a conversion factor of 2. They arrived at the conversion factor of 2 by considering a number of variables including pricing, support, length of term, and renewal rates. They 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 they 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.
License Mix-Adjusted Metrics
These metrics assume that all new software and cloud services bookings since the start of FY’14 were perpetual license sales that included support in subsequent periods. The license mix-adjusted amount is calculated by converting the ACV (as defined above) of a new subscription solutions booking in the period to an assumed perpetual license equivalent by multiplying the ACV by a conversion factor of 2 (as defined above), and adding that amount to the perpetual license revenue amounts recognized in that period. Support calculated at 20% of the annual value of the converted amount is added to support revenue in future periods, beginning the quarter after the converted booking is assumed to be recognized. The assumed support revenue is spread ratably over a 12 month period and is assumed to renew in subsequent years.
Annualized Recurring Revenue (ARR)
They currently offer their solutions on premise, as a cloud service, and as SaaS offerings. Their on premise solutions can be licensed either as perpetual with annual support contracts or through a subscription, which is a combination of license and support. Beginning in FY’16, they launched a number of initiatives designed to incentivize more of their customers to purchase their solutions on a subscription basis. If successful, these initiatives will cause an increasing percentage of their revenue to come from subscriptions, which is expected to grow their recurring software revenue.
To help investors understand and assess the success of this expected revenue transition, they are providing an Annualized Recurring Revenue operating measure. Annualized Recurring Revenue (ARR) for a given quarter is calculated by dividing the non-GAAP subscription and support software revenue 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 and does not include revenue reported as perpetual license or professional services revenue in their consolidated statement of income. Subscription and support revenue and ARR reported 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, and these elements can result in variability in reported ARR.
Constant Currency Change Metric
Year-over-year changes in revenue and bookings on a constant currency basis compare actual 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. Non-GAAP revenue, non-GAAP operating expenses, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, non-GAAP net income and non-GAAP EPS exclude the effect of purchase accounting on the fair value of acquired deferred revenue and costs, stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, acquisition-related expenses, costs associated with terminating a U.S. pension plan, costs associated with their previously disclosed China investigation, certain identified non-operating gains and losses, the related tax effects of the preceding items, credit facility refinancing expenses and certain discrete tax items. They use these non-GAAP measures, and they believe that they assist their investors, to make period-to-period comparisons of their operational performance because they provide a view of their operating results without items that are not, in their view, indicative of their core operating results. They believe that these non-GAAP measures help illustrate underlying trends in their business, and they use the measures to establish budgets and operational goals, communicated internally and externally, for managing their business and evaluating their performance. They believe that providing non-GAAP measures affords investors a view of their operating results that may be more easily compared to the results of peer companies. In addition, compensation of their executives is based in part on the performance of their 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. Management uses, and investors should consider, non-GAAP measures in conjunction with their GAAP results.
PTC also provides information on “free cash flow” and “free cash flow return” to enable investors to assess their ability to generate cash without incurring additional external financings and to evaluate their performance against their announced long-term goal of returning approximately 40% of their free cash flow to shareholders via stock repurchases. Free-cash flow is net cash provided by (used in) operating activities less capital expenditures, and free-cash flow return is the value of shares repurchased divided by free cash flow.
About PTC
PTC (NASDAQ: PTC) is a global provider of technology platforms and solutions that transform how companies create, operate, and service the “things” in the Internet of Things (IoT). The company’s next-generation ThingWorx technology platform gives developers the tools they need to capture, analyze, and capitalize on the vast amounts of data being generated by smart, connected products and systems. The company’s field-proven solutions are deployed in more than 26,000 businesses worldwide to generate a product or service advantage. PTC’s award-winning CEO, considered an industry thought leader, co-authored the definitive guides to the impact of the IoT on business in the Harvard Business Review.
| PTC Inc. Unaudited Consolidated Statements of Income (in thousands, except per share data) |
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| Three Months Ended | Six Months Ended | ||||||||||||||||
| April 2, 2016 |
April 4, 2015 |
April 2, 2016 |
April 4, 2015 |
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| Revenue: | |||||||||||||||||
| Subscription | $ | 23,659 | $ | 15,765 | $ | 45,835 | $ | 29,988 | |||||||||
| Support | 160,625 | 168,727 | 332,381 | 350,356 | |||||||||||||
| Total recurring software | 184,284 | 184,492 | 378,216 | 380,344 | |||||||||||||
| Perpetual license | 39,689 | 70,187 | 87,452 | 134,935 | |||||||||||||
| Total software | 223,973 | 254,679 | 465,668 | 515,279 | |||||||||||||
| Professional services | 48,654 | 59,440 | 97,976 | 124,282 | |||||||||||||
| Total revenue | 272,627 | 314,119 | 563,644 | 639,561 | |||||||||||||
| Cost of revenue: | |||||||||||||||||
| Cost of software revenue (1) | 38,613 | 34,518 | 75,427 | 69,243 | |||||||||||||
| Cost of professional services revenue(1) | 41,578 | 51,536 | 84,912 | 109,753 | |||||||||||||
| Total cost of revenue | 80,191 | 86,054 | 160,339 | 178,996 | |||||||||||||
| Gross margin | 192,436 | 228,065 | 403,305 | 460,565 | |||||||||||||
| Operating expenses: | |||||||||||||||||
| Sales and marketing (1) | 87,177 | 83,865 | 169,606 | 173,349 | |||||||||||||
| Research and development (1) | 56,610 | 60,158 | 114,279 | 121,255 | |||||||||||||
| General and administrative (1) | 33,916 | 32,394 | 72,483 | 67,524 | |||||||||||||
| Amortization of acquired intangible assets | 8,396 | 9,173 | 16,746 | 18,586 | |||||||||||||
| Restructuring charges | 4,579 | 38,487 | 41,726 | 38,232 | |||||||||||||
| Total operating expenses | 190,678 | 224,077 | 414,840 | 418,946 | |||||||||||||
| Operating income (loss) | 1,758 | 3,988 | (11,535 | ) | 41,619 | ||||||||||||
| Other expense, net | (5,327 | ) | (3,601 | ) | (11,580 | ) | (6,825 | ) | |||||||||
| Income (loss) before income taxes | (3,569 | ) | 387 | (23,115 | ) | 34,794 | |||||||||||
| Provision (benefit) for income taxes | 1,604 | (5,005 | ) | 5,950 | (882 | ) | |||||||||||
| Net income (loss) | $ | (5,173 | ) | $ | 5,392 | $ | (29,065 | ) | $ | 35,676 | |||||||
| Earnings (loss) per share: | |||||||||||||||||
| Basic | $ | (0.05 | ) | $ | 0.05 | $ | (0.25 | ) | $ | 0.31 | |||||||
| Weighted average shares outstanding | 114,563 | 114,944 | 114,354 | 115,147 | |||||||||||||
| Diluted | $ | (0.05 | ) | $ | 0.05 | $ | (0.25 | ) | $ | 0.31 | |||||||
| Weighted average shares outstanding | 114,563 | 115,922 | 114,354 | 116,479 | |||||||||||||
| (1) The amounts in the tables above include stock-based compensation as follows: | |||||||||||||||||
| Three Months Ended | Three Months Ended | ||||||||||||||||
| April 2, 2016 |
April 4, 2015 |
April 2, 2016 |
April 4, 2015 |
||||||||||||||
| Cost of software revenue | $ | 1,100 | $ | 1,107 | $ | 3,005 | $ | 2,025 | |||||||||
| Cost of professional services revenue | 1,279 | 1,504 | 2,730 | 3,193 | |||||||||||||
| Sales and marketing | 3,777 | 3,545 | 8,059 | 6,746 | |||||||||||||
| Research and development | 2,534 | 3,001 | 5,047 | 6,087 | |||||||||||||
| General and administrative | 6,146 | 3,665 | 19,184 | 6,013 | |||||||||||||
| Total stock-based compensation | $ | 14,836 | $ | 12,822 | $ | 38,025 | $ | 24,064 | |||||||||
| PTC Inc. Non-GAAP Financial Measures and Reconciliations(Unaudited) (in thousands, except per share data) |
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| Three Months Ended | Six Months Ended | ||||||||||||||||
| April 2, 2016 |
April 4, 2015 |
April 2, 2016 |
April 4, 2015 |
||||||||||||||
| GAAP revenue | $ | 272,627 | $ | 314,119 | $ | 563,644 | $ | 639,561 | |||||||||
| Fair value adjustment of acquired deferred subscription revenue | 777 | 590 | 965 | 1,272 | |||||||||||||
| Fair value adjustment of acquired deferred support revenue | – | 265 | – | 730 | |||||||||||||
| Fair value adjustment of acquired deferred services revenue | 286 | 278 | 595 | 535 | |||||||||||||
| Non-GAAP revenue | $ | 273,690 | $ | 315,252 | $ | 565,204 | $ | 642,098 | |||||||||
| GAAP gross margin | $ | 192,436 | $ | 228,065 | $ | 403,305 | $ | 460,565 | |||||||||
| Fair value adjustment of acquired deferred revenue | 1,063 | 1,133 | 1,560 | 2,537 | |||||||||||||
| Fair value adjustment to deferred services cost | (125 | ) | (151 | ) | (257 | ) | (257 | ) | |||||||||
| Stock-based compensation | 2,379 | 2,611 | 5,735 | 5,218 | |||||||||||||
| Amortization of acquired intangible assets included in cost of software revenue | 6,725 | 4,714 | 11,852 | 9,481 | |||||||||||||
| Non-GAAP gross margin | $ | 202,478 | $ | 236,372 | $ | 422,195 | $ | 477,544 | |||||||||
| GAAP operating income (loss) | $ | 1,758 | $ | 3,988 | $ | (11,535 | ) | $ | 41,619 | ||||||||
| Fair value adjustment of acquired deferred revenue | 1,063 | 1,133 | 1,560 | 2,537 | |||||||||||||
| Fair value adjustment to deferred services cost | (125 | ) | (151 | ) | (257 | ) | (257 | ) | |||||||||
| Stock-based compensation | 14,836 | 12,822 | 38,025 | 24,064 | |||||||||||||
| Amortization of acquired intangible assets included in cost of software revenue | 6,725 | 4,714 | 11,852 | 9,481 | |||||||||||||
| Amortization of acquired intangible assets | 8,396 | 9,173 | 16,746 | 18,586 | |||||||||||||
| Acquisition-related charges included in general and administrative costs | 1,071 | 1,892 | 2,278 | 5,925 | |||||||||||||
| US pension plan termination-related costs | – | 1,713 | – | 3,397 | |||||||||||||
| Restructuring charges | 4,579 | 38,487 | 41,726 | 38,232 | |||||||||||||
| Non-GAAP operating income (2) | $ | 38,303 | $ | 73,771 | $ | 100,395 | $ | 143,584 | |||||||||
| GAAP net income (loss) | $ | (5,173 | ) | $ | 5,392 | $ | (29,065 | ) | $ | 35,676 | |||||||
| Fair value adjustment of acquired deferred revenue | 1,063 | 1,133 | 1,560 | 2,537 | |||||||||||||
| Fair value adjustment to deferred services cost | (125 | ) | (151 | ) | (257 | ) | (257 | ) | |||||||||
| Stock-based compensation | 14,836 | 12,822 | 38,025 | 24,064 | |||||||||||||
| Amortization of acquired intangible assets included in cost of software revenue | 6,725 | 4,714 | 11,852 | 9,481 | |||||||||||||
| Amortization of acquired intangible assets | 8,396 | 9,173 | 16,746 | 18,586 | |||||||||||||
| Acquisition-related charges included in general and administrative costs | 1,071 | 1,892 | 2,278 | 5,925 | |||||||||||||
| US pension plan termination-related costs | – | 1,713 | – | 3,397 | |||||||||||||
| Restructuring charges | 4,579 | 38,487 | 41,726 | 38,232 | |||||||||||||
| Non-operating credit facility refinancing costs | – | – | 2,359 | – | |||||||||||||
| Income tax adjustments (3) | (5,208 | ) | (13,757 | ) | (279 | ) | (17,243 | ) | |||||||||
| Non-GAAP net income | $ | 26,164 | $ | 61,418 | $ | 84,945 | $ | 120,398 | |||||||||
| GAAP diluted earnings (loss) per share | $ | (0.05 | ) | $ | 0.05 | $ | (0.25 | ) | $ | 0.31 | |||||||
| Fair value of acquired deferred revenue | 0.01 | 0.01 | 0.01 | 0.02 | |||||||||||||
| Stock-based compensation | 0.13 | 0.11 | 0.33 | 0.21 | |||||||||||||
| Amortization of acquired intangibles | 0.13 | 0.12 | 0.25 | 0.24 | |||||||||||||
| Acquisition-related charges | 0.01 | 0.02 | 0.02 | 0.05 | |||||||||||||
| US pension plan termination-related costs | – | 0.01 | – | 0.03 | |||||||||||||
| Restructuring charges | 0.04 | 0.33 | 0.36 | 0.33 | |||||||||||||
| Non-operating credit facility refinancing costs | – | – | 0.02 | – | |||||||||||||
| Income tax adjustments | (0.05 | ) | (0.12 | ) | (0.00 | ) | (0.15 | ) | |||||||||
| Non-GAAP diluted earnings per share | $ | 0.23 | $ | 0.53 | $ | 0.74 | $ | 1.03 | |||||||||
| GAAP diluted weighted average shares outstanding | 114,563 | 115,922 | 114,354 | 116,479 | |||||||||||||
| Dilutive effect of stock based compensation plans | 428 | – | 758 | – | |||||||||||||
| Non-GAAP diluted weighted average shares outstanding | 114,991 | 115,922 | 115,112 | 116,479 | |||||||||||||
| (2)Operating margin impact of non-GAAP adjustments: | |||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||
| April 2, 2016 |
April 4, 2015 |
April 2, 2016 |
April 4, 2015 |
||||||||||||||
| GAAP operating margin | 0.6 | % | 1.3 | % | -2.0 | % | 6.5 | % | |||||||||
| Fair value of acquired deferred revenue | 0.4 | % | 0.4 | % | 0.3 | % | 0.4 | % | |||||||||
| Fair value adjustment to deferred services cost | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | |||||||||
| Stock-based compensation | 5.4 | % | 4.1 | % | 6.7 | % | 3.8 | % | |||||||||
| Amortization of acquired intangibles | 5.5 | % | 4.4 | % | 5.1 | % | 4.4 | % | |||||||||
| Acquisition-related charges | 0.4 | % | 0.6 | % | 0.4 | % | 0.9 | % | |||||||||
| US pension plan termination-related costs | 0.0 | % | 0.5 | % | 0.0 | % | 0.5 | % | |||||||||
| Restructuring charges | 1.7 | % | 12.3 | % | 7.4 | % | 6.0 | % | |||||||||
| Non-GAAP operating margin | 14.0 | % | 23.4 | % | 17.8 | % | 22.4 | % | |||||||||
(3) They have recorded a full valuation allowance against their U.S. net deferred tax assets and a valuation allowance against net deferred tax assets in certain foreign jurisdictions. As they are profitable on a non-GAAP basis, the 2016 and 2015 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. Income tax adjustments for the three and six months ended April 4, 2015 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. However, for the six months ended April 2, 2016, because of low expected full year GAAP earnings combined with the relatively large year-to-date GAAP loss, the non-GAAP provision for the second quarter and first six months of 2016 calculated based on their historical methodology is not reflective of their full year expected non-GAAP tax rate. As a result, in the second quarter they changed their methodology for calculating their non-GAAP tax provision. For the six months ended April 2, 2016, their non-GAAP tax provision is based on their annual expected non-GAAP tax rate applied to their year-to-date non-GAAP earnings.
| PTC Inc. Unaudited Condensed Consolidated Balance Sheets (in thousands) |
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| April 2, 2016 |
September 30, 2015 |
||||||
| ASSETS | |||||||
| Cash and cash equivalents | $ | 368,456 | $ | 273,417 | |||
| Accounts receivable, net | 146,669 | 197,275 | |||||
| Property and equipment, net | 62,867 | 65,162 | |||||
| Goodwill and acquired intangible assets, net | 1,511,416 | 1,360,342 | |||||
| Other assets | 322,094 | 313,717 | |||||
| Total assets | $ | 2,411,502 | $ | 2,209,913 | |||
| Liabilities and Stockholder’s Equity | |||||||
| Deferred revenue | $ | 446,608 | $ | 386,850 | |||
| Borrowings under credit facility | 838,125 | 668,125 | |||||
| Other liabilities | 272,665 | 294,767 | |||||
| Stockholders’ equity | 854,104 | 860,171 | |||||
| Total liabilities and stockholders’ equity | $ | 2,411,502 | $ | 2,209,913 | |||
| PTC Inc. Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) |
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| Three Months Ended | Six Months Ended | ||||||||||||||||
| April 2, 2016 |
April 4, 2015 |
April 2, 2016 |
April 4, 2015 |
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| Cash flows from operating activities: | |||||||||||||||||
| Net income (loss) | $ | (5,173 | ) | $ | 5,392 | $ | (29,065 | ) | $ | 35,676 | |||||||
| Stock-based compensation | 14,836 | 12,822 | 38,025 | 24,064 | |||||||||||||
| Depreciation and amortization | 22,291 | 20,968 | 42,904 | 42,205 | |||||||||||||
| Accounts receivable | 28,398 | (3,089 | ) | 63,617 | 22,711 | ||||||||||||
| Accounts payable and accruals | (28,067 | ) | 33,720 | (17,692 | ) | (17,198 | ) | ||||||||||
| Deferred revenue | 22,757 | 40,976 | 24,019 | 32,200 | |||||||||||||
| Income taxes | (5,471 | ) | (13,612 | ) | (8,826 | ) | (16,565 | ) | |||||||||
| Excess tax benefits from stock-based awards | – | – | (56 | ) | (163 | ) | |||||||||||
| Other | (686 | ) | (5,185 | ) | (2,787 | ) | (17,306 | ) | |||||||||
| Net cash provided by operating activities (4) | 48,885 | 91,992 | 110,139 | 105,624 | |||||||||||||
| Capital expenditures | (4,681 | ) | (6,160 | ) | (8,866 | ) | (14,107 | ) | |||||||||
| Acquisitions of businesses, net of cash acquired (5) | (99,411 | ) | – | (164,191 | ) | 180 | |||||||||||
| Proceeds (payments) on debt, net | 120,000 | (75,000 | ) | 170,000 | (81,250 | ) | |||||||||||
| Proceeds from issuance of common stock | – | 3 | 1 | 6 | |||||||||||||
| Payments of withholding taxes in connection with vesting of stock-based awards |
(638 | ) | (195 | ) | (15,471 | ) | (21,864 | ) | |||||||||
| Excess tax benefits from stock-based awards | – | – | 56 | 163 | |||||||||||||
| Other financing & investing activities | – | – | (2,300 | ) | (1,000 | ) | |||||||||||
| Foreign exchange impact on cash | 7,504 | (3,877 | ) | 5,671 | (13,591 | ) | |||||||||||
| Net change in cash and cash equivalents | 71,659 | 6,763 | 95,039 | (25,839 | ) | ||||||||||||
| Cash and cash equivalents, beginning of period | 296,797 | 261,052 | 273,417 | 293,654 | |||||||||||||
| Cash and cash equivalents, end of period | $ | 368,456 | $ | 267,815 | $ | 368,456 | $ | 267,815 | |||||||||
(4) The three months ended April 2, 2016 include a $28 million legal settlement payment. The three and six months ended April 2, 2016 include $25 million and $42 million in restructuring payments, respectively. The three and six months ended April 4, 2015 include $5 million and $23 million in restructuring payments, respectively. The three and six months ended April 4, 2015 included $5 million and $15 million of voluntary contributions to a non-U.S. pension plan, respectively.
(5) PTC acquired 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).