01—Abstract
Summary
Summary of the 10-K filed November 26, 2014. Cited figures are marked; the original filing is the authoritative source.
PTC Inc. reported fiscal 2014 (year ended September 30, 2014) total revenue of $1.36 billiona, up 5% year over year, with GAAP operating income of $196.6 million (14.5% operating margin) versus $127.3 million in 2013.
GAAP diluted EPS rose to $1.34b from $1.19, and non-GAAP diluted EPS rose to $2.17 from $1.81. Cash provided by operations was $304.6 million, up from $224.7 million. The company says it is positioning itself around the Internet of Things through the 2014 acquisitions of ThingWorx, Axeda and Atego, which together added $9.8 million to 2014 revenue and approximately $12 million in operating losses.
The company adopted a capital allocation strategy aiming to return about 40% of free cash flow to shareholders over time. The Board authorized up to $600 millionc of share repurchases through September 30, 2017, and PTC entered a new $1.5 billion credit facility maturing September 15, 2019. At year-end, $612 million was outstanding under the facility, with $408 million available to borrow under the revolver subject to covenants.
The company repurchased 5.1 million shares for $224.9 milliond in 2014, including $37.5 million held back pending final settlement of an accelerated share repurchase. For fiscal 2015, PTC guided to revenue growth of 0% to 2% and non-GAAP operating margin of 26%, with GAAP EPS of $1.33 to $1.40 and non-GAAP EPS of $2.33 to $2.40. The company also disclosed a $27 million restructuring charge affecting 283 employees, an ongoing SEC and Department of Justice investigation into payments in China that could result in fines but for which no liability has been recorded, and a planned termination of its U.S. pension plan with estimated pre-tax settlement losses of approximately $65 million.
02—Key points
Key Highlights
- Revenue of $1,357.0 million in 2014, up 5% year over year; license revenue rose 7% to $369.7 million and support revenue rose 6% to $692.3 million, while service revenue was flat at $295.0 million.
- GAAP operating income of $196.6 million (14.5% operating margin) compared with $127.3 million in 2013; non-GAAP operating margin was 25.1% versus 22.1%.
- GAAP diluted EPS of $1.34 (up from $1.19) and non-GAAP diluted EPS of $2.17 (up from $1.81), with GAAP results helped by a $18.1 million valuation allowance release tied to acquisitions.
- Cash from operations of $304.6 million, and cash and equivalents of $293.7 million at September 30, 2014, versus $241.9 million a year earlier.
- Capital allocation strategy targets returning about 40% of free cash flow to shareholders; a $600 million repurchase authorization runs through September 30, 2017, and $224.9 million of stock was repurchased in 2014.
- Total debt under the new $1.5 billion credit facility was $611.9 million at year-end, with a leverage ratio of 1.82 to 1.00 against a 3.00 maximum covenant.
- Fiscal 2015 guidance calls for 0% to 2% revenue growth and non-GAAP EPS of $2.33 to $2.40, with a $27 million restructuring charge taken in the fourth quarter of 2014 and an ongoing China investigation with no recorded liability.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, PTC kept $0.12.
- Revenue$1.36B100.0%
- Cost of revenue−$373.7M27.5%
- Gross profit$983.3M72.5%
- Operating costs−$786.7M58.0%
- Operating income$196.6M14.5%
- Interest, other & tax−$36.4M2.7%
- Net income$160.2M11.8%
Where FY2014 revenue went
$1.36B- Other operating costs: $560.2M, 41% of revenue
- Cost of revenue: $373.7M, 28% of revenue
- R&D: $226.5M, 17% of revenue
- Net income: $160.2M, 12% of revenue
- Interest, other & tax: $36.4M, 2.7% of revenue
Kept 12% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed November 26, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $1.36B$1.29B | +4.9% |
| Cost of Revenue | $373.68M$373.04M | +0.2% |
| Gross Profit | $983.28M$920.50M | +6.8% |
| R&D Expenses | $226.50M$221.92M | +2.1% |
| Operating Expenses | $786.71M$793.18M | −0.8% |
| Operating Income | $196.58M$127.32M | +54.4% |
| Interest Expense | $8.15M$6.98M | +16.9% |
| Net Income | $160.19M$143.77M | +11.4% |
| EPS (Basic) | $1.36$1.20 | +13.3% |
| EPS (Diluted) | $1.34$1.19 | +12.6% |
| Shares Outstanding (Basic) | 118.09M119.47M | −1.2% |
| Shares Outstanding (Diluted) | 119.98M121.24M | −1.0% |
05—Questions
Frequently Asked Questions
How did PTC's revenue and profitability change in fiscal 2014?
Total revenue rose 5% to $1,357.0 million. GAAP operating income increased to $196.6 million from $127.3 million, and GAAP diluted EPS rose to $1.34 from $1.19. The GAAP results include tax benefits of $18.1 million from a valuation allowance release tied to acquisitions.
What acquisitions did PTC complete in 2014 and what did they contribute?
PTC acquired ThingWorx (about $111.5 million net of cash), Axeda (about $165.9 million) and Atego (about $46.1 million). Together these added $9.8 million to 2014 revenue, and Axeda, Atego and ThingWorx collectively added approximately $12 million in operating losses.
What is PTC's guidance for fiscal 2015?
The company expects revenue growth of 0% to 2%, non-GAAP operating margin of 26% (up from 25% in 2014), and non-GAAP EPS of $2.33 to $2.40, with GAAP EPS of $1.33 to $1.40. Targets assume $1.25 per Euro and 115 Yen per dollar.
How much capital has PTC returned to shareholders and what debt does it carry?
PTC repurchased 5.1 million shares for $224.9 million in 2014, including $37.5 million held back pending final settlement of an accelerated share repurchase. Its $1.5 billion credit facility had $611.9 million outstanding at September 30, 2014, with $408 million available to borrow, and the facility matures September 15, 2019.
What legal and regulatory risks does the filing disclose?
PTC is cooperating with the SEC and Department of Justice on payments and expenses by certain business partners and employees in China that raise questions under the Foreign Corrupt Practices Act. The company cannot estimate any resolution amount and has not recorded a liability, and terminated certain employees and business partners in China. Revenue from China has historically been 5% to 7% of total revenue.
06—Continue