01—Abstract
Summary
Summary of the 10-K filed November 22, 2013. Cited figures are marked; the original filing is the authoritative source.
PTC Inc. (Nasdaq: PMTC; ticker later changed to PTC in December 2013) reported fiscal 2013 results for the year ended September 30, 2013, with total revenue of $1,293.5 milliona, up 3% year over year (up 4% on a constant currency basis).
The company said the result was held back by a slowdown in global manufacturing, particularly in Europe and the Americas, and by unfavorable currency movements. Organic revenue, excluding $95 millionb from businesses acquired in 2013, was down 5% year over year. License revenue was $344.2 million, down 1%, and organic license revenue fell 9%.
Support revenue grew 7% to $654.7 millionc and service revenue was flat at $294.7 million. GAAP results improved sharply. Net income was $143.8 million, or $1.19 diluted EPS, compared with a net loss of $35.4 million in 2012, which had included a $124.5 million non-cash tax charge.
GAAP operating income was $127.3 milliond, a 9.8% operating margin. Non-GAAP operating margin rose to 22.1% from 19.6%, and non-GAAP diluted EPS rose to $1.81 from $1.51. The company recorded $52.2 million of restructuring charges, mostly severance for about 550 employees, and expects these actions to reduce operating expenses by $16 million per quarter.
Cash and cash equivalents fell to $241.9 million from $489.5 million, mainly because of the Servigistics, Enigma and NetIDEAS acquisitions and debt repayment. Debt outstanding under the credit facility was $258.1 million at year end. The filing also flags material uncertainties.
PTC is cooperating with the SEC and the Department of Justice on an investigation into certain payments in China that raise Foreign Corrupt Practices Act questions. The company has not recorded a liability because it cannot estimate the amount. For fiscal 2014, management targets revenue growth of 2% to 3%, non-GAAP operating margin of about 25%, and non-GAAP EPS of $2.00 to $2.10.
02—Key points
Key Highlights
- Total revenue was $1,293.5 million, up 3% year over year, but organic revenue excluding 2013 acquisitions was down 5%.
- GAAP net income was $143.8 million ($1.19 diluted EPS), compared with a net loss of $35.4 million in 2012 that included a $124.5 million non-cash tax valuation allowance charge.
- Non-GAAP operating margin improved to 22.1% from 19.6%, and non-GAAP diluted EPS rose 20% to $1.81 from $1.51.
- License revenue was $344.2 million, down 1%, with organic license revenue down 9%, reflecting the slowdown in global manufacturing.
- Restructuring charges of $52.2 million were recorded for 2013, with expected savings of $16 million per quarter in operating expenses.
- Cash fell to $241.9 million from $489.5 million after $246 million of acquisitions and $112 million of debt repayment; $258.1 million remained outstanding on the credit facility.
- An SEC and Department of Justice investigation into China-related payments remains open, with no liability recorded because the amount cannot be estimated.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, PTC kept $0.11.
- Revenue$1.29B100.0%
- Cost of revenue−$373.0M28.8%
- Gross profit$920.5M71.2%
- Operating costs−$793.2M61.3%
- Operating income$127.3M9.8%
- Interest, other & tax$16.4M1.3%
- Net income$143.8M11.1%
Where FY2013 revenue went
$1.29B- Other operating costs: $571.3M, 44% of revenue
- Cost of revenue: $373.0M, 29% of revenue
- R&D: $221.9M, 17% of revenue
- Operating income: $127.3M, 9.8% of revenue
Kept 9.8% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed November 22, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $1.29B$1.26B | +3.0% |
| Cost of Revenue | $373.04M$372.13M | +0.2% |
| Gross Profit | $920.50M$883.55M | +4.2% |
| R&D Expenses | $221.92M$214.96M | +3.2% |
| Operating Expenses | $793.18M$755.46M | +5.0% |
| Operating Income | $127.32M$128.10M | −0.6% |
| Interest Expense | $6.98M$4.75M | +47.0% |
| Net Income | $143.77M-$35.40M | +506.2% |
| EPS (Basic) | $1.20$-0.30 | +500.0% |
| EPS (Diluted) | $1.19$-0.30 | +496.7% |
| Shares Outstanding (Basic) | 119.47M118.70M | +0.6% |
| Shares Outstanding (Diluted) | 121.24M118.70M | +2.1% |
05—Questions
Frequently Asked Questions
How did PTC perform financially in fiscal 2013?
Total revenue rose 3% to $1,293.5 million, and GAAP operating income was $127.3 million, a 9.8% margin. Results were helped by a valuation allowance reversal and other tax items, which produced GAAP diluted EPS of $1.19. Non-GAAP diluted EPS was $1.81, up from $1.51.
What is driving the difference between GAAP and non-GAAP results?
Non-GAAP measures exclude stock-based compensation, amortization of acquired intangibles, acquisition-related charges, restructuring charges, and certain tax items. In 2013, restructuring charges of $52.2 million and stock-based compensation of $48.8 million were among the largest exclusions.
What are the main risks flagged in the filing?
Key risks include a slowdown in discrete manufacturing, competition from Dassault Systèmes, Siemens and Oracle, and the China investigation, which could bring fines and penalties that significantly affect cash. The company also has a credit facility with covenants, and 85% of its cash was held outside the United States at September 30, 2013.
What is management's outlook for 2014?
Management expects revenue growth of 2% to 3%, non-GAAP operating margin of about 25%, and non-GAAP EPS of $2.00 to $2.10. These targets assume exchange rates of $1.35 per euro and 98 yen per U.S. dollar.
06—Continue