01—Abstract
Summary
Summary of the 10-K filed November 18, 2019. Cited figures are marked; the original filing is the authoritative source.
PTC Inc. (Nasdaq: PTC) reported fiscal 2019 (year ended September 30, 2019) total revenue of $1.26 billiona under ASC 606 ($1.31 billion under ASC 605), with GAAP net loss of $27.5 million under ASC 606 (net income of $3.0 million under ASC 605).
Under ASC 605, ARR grew 10% to $1,116 millionb (12% at the guidance rate), recurring software revenue rose 10% to $1,079 million, and IoT and AR ARR grew 26%. Operating cash flow was $285 million, up from $248 million, and management said IoT and AR now exceed 12% of total ARR and one-third of total bookings. Non-GAAP operating margin under ASC 605 was 22.4%, up from 18.3%, and non-GAAP diluted EPS was $1.74 versus $1.45.
The company completed its transition to subscription-only licensing in January 2019 (excluding Kepware). Subscription mix shift weighed on revenue and earnings, and management expects the transition's effect to moderate in fiscal 2020 and expects revenue growth and margin expansion in fiscal 2020. Restructuring charges rose to $51.1 millionc, including a $32.7 million charge tied to exiting the Needham headquarters, and a workforce realignment toward IoT and AR is expected to bring up to $25 million of additional restructuring in 2020.
After fiscal year-end, PTC acquired Onshape, a SaaS CAD platform, for approximately $470 milliond net of cash acquired, funded by a $455 million borrowing under its credit facility. Total debt rose to approximately $1.1 billion as of November 15, 2019, the revolving commitment was increased to $1 billion, and the company plans to suspend its share repurchase program in 2020 to accelerate debt repayment.
02—Key points
Key Highlights
- Revenue of $1,255.6 million under ASC 606 versus $1,241.8 million in 2018; under ASC 605, total revenue was $1,311.5 million, up 6% (8% constant currency).
- GAAP net loss of $27.5 million (EPS $(0.23)) under ASC 606, compared with net income of $52.0 million in 2018; under ASC 605, net income was $3.0 million.
- ARR of $1,116 million at year-end, up 10% (12% constant currency); IoT and AR ARR grew 26%, and these businesses exceed 12% of total ARR.
- Operating cash flow of $285 million, up from $248 million; the company repurchased $115 million of stock in 2019.
- Onshape acquisition completed November 1, 2019 for approximately $470 million net of cash acquired, funded by a $455 million credit facility borrowing; total debt about $1.1 billion.
- Share repurchases to be suspended in 2020 to accelerate debt repayment; revolving commitment increased to $1 billion on November 13, 2019.
- Rockwell Automation made a $1 billion equity investment in PTC in the fourth quarter of 2018 under a strategic alliance; a fourth-quarter mega deal with Rockwell exceeded $5 million in bookings.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2019, PTC lost $0.02.
- Revenue$1.26B100.0%
- Cost of revenue−$325.4M25.9%
- Gross profit$930.3M74.1%
- Operating costs−$867.2M69.1%
- Operating income$63.0M5.0%
- Interest, other & tax−$90.5M7.2%
- Net income−$27.5M2.2%
Where FY2019 revenue went
$1.26B- Other operating costs: $620.3M, 49% of revenue
- Cost of revenue: $325.4M, 26% of revenue
- R&D: $246.9M, 20% of revenue
- Operating income: $63.0M, 5.0% of revenue
Kept 5.0% as operating incomeOperating income $63.0M · 5.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed November 18, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $1.26B$1.24B | +1.1% |
| Cost of Revenue | $325.38M$326.50M | −0.3% |
| Gross Profit | $930.25M$915.32M | +1.6% |
| R&D Expenses | $246.89M$249.79M | −1.2% |
| Operating Expenses | $867.21M$842.71M | +2.9% |
| Operating Income | $63.04M$72.61M | −13.2% |
| Interest Expense | $43.05M$41.67M | +3.3% |
| Net Income | -$27.46M$51.99M | −152.8% |
| EPS (Basic) | $-0.23$0.45 | −151.1% |
| EPS (Diluted) | $-0.23$0.44 | −152.3% |
| Shares Outstanding (Basic) | 117.72M116.39M | +1.1% |
| Shares Outstanding (Diluted) | 117.72M118.16M | −0.4% |
05—Questions
Frequently Asked Questions
How did PTC's revenue and profitability look in fiscal 2019?
Under ASC 606, revenue was $1,255.6 million and the company posted a GAAP net loss of $27.5 million. Under ASC 605, revenue was $1,311.5 million with net income of $3.0 million. Non-GAAP operating margin under ASC 605 was 22.4%, up from 18.3%, and non-GAAP diluted EPS was $1.74 versus $1.45 in 2018.
How is the subscription transition affecting results?
The company completed its move to subscription-only licensing in January 2019 (excluding Kepware). The filing says the transition was a headwind to revenue and earnings in 2019, with subscription bookings mix up 800 basis points versus 2018, and management expects the effect to moderate in fiscal 2020. Under ASC 606, revenue volatility increased because a significant portion of subscription license revenue is recognized upfront.
What is the Onshape acquisition and how is it being financed?
PTC acquired Onshape, a SaaS product development platform combining CAD with data management and collaboration tools, on November 1, 2019 for approximately $470 million net of cash acquired. It borrowed $455 million under its existing credit facility to fund the deal, and the company said the acquisition should help it attract new customers with a SaaS offering.
What is the company's debt position and capital return policy going forward?
As of November 15, 2019, total debt was approximately $1.1 billion, including about $628 million under the $1 billion secured credit facility and $500 million of 6.00% Senior Notes due 2024. The company plans to suspend its share repurchase program in 2020 in order to accelerate debt repayments.
What restructuring costs and workforce changes should investors expect?
Restructuring and other charges were $51.1 million in 2019, including a $32.7 million charge for the Needham headquarters lease exit and $15.7 million for a workforce realignment toward IoT and AR. The company expects a restructuring charge of up to $25 million in 2020 from a further realignment, which is reflected in its 2020 guidance.
06—Continue