01—Abstract
Summary
Summary of the 10-K filed November 20, 2020. Cited figures are marked; the original filing is the authoritative source.
PTC Inc. (Nasdaq: PTC) reported fiscal 2020 (year ended September 30, 2020) total revenue of $1.46 billiona, up 16% year over year, with recurring revenue up 26%.
GAAP operating income rose to $210.9 millionb (14.5% operating margin) from $63.0 million, and GAAP diluted EPS was $1.12 versus a loss of $(0.23) in FY'19. Non-GAAP operating margin was 29.0%, and non-GAAP diluted EPS was $2.57. Annual Recurring Revenue (ARR) grew 14% to $1,270 million (11% in constant currency), and management noted it was the third consecutive year of double-digit ARR growth.
Growth Products ARR rose 34%, Core ARR rose 14%, and FSG ARR declined 2%. Cash from operations was $233.8 millionc, down from $285.1 million, mainly due to higher interest and restructuring payments. Free cash flow was $213.6 million.
The company ended the year with $335.1 milliond of cash and marketable securities against $1,018 million of total debt. Debt rose sharply after the roughly $469 million acquisition of Onshape, funded with $1 billion of Senior Notes issued in February 2020 (3.625% due 2025 and 4.000% due 2028), which were used to redeem the 6.000% notes due 2024 and repay credit facility borrowings. The company also disclosed a new $1 billion stock repurchase authorization approved November 13, 2020.
The filing highlights risks tied to COVID-19, including higher churn (8.6% in FY'20 versus 7.4% in FY'19), weaker professional services revenue (down 14%), and exposure to discrete manufacturing demand. Other items include an open South Korean tax dispute (about $12 million paid, with potential additional exposure of $17 million) and a putative ERISA class action filed September 17, 2020, for which the company could not estimate the outcome.
02—Key points
Key Highlights
- Total revenue rose 16% to $1,458.4 million in FY'20, with total recurring revenue up 26% to $1,281.9 million.
- ARR grew 14% to $1,270 million (11% constant currency), the third consecutive year of double-digit ARR growth; Growth Products ARR grew 34%.
- GAAP operating income increased to $210.9 million (14.5% margin) from $63.0 million; non-GAAP operating margin was 29.0% versus 20.3%.
- GAAP diluted EPS was $1.12 versus a loss of $(0.23) in FY'19; non-GAAP diluted EPS was $2.57 versus $1.64. The effective tax rate was 3%, aided by a reduction in the U.S. valuation allowance.
- Cash from operations fell to $233.8 million from $285.1 million, while free cash flow was $213.6 million.
- Total debt rose to $1,018 million from $673 million after $1 billion of new Senior Notes funded the Onshape acquisition; the company ended the year with $335.1 million in cash and marketable securities.
- Churn increased to 8.6% in FY'20 from 7.4% in FY'19, and a $1 billion share repurchase authorization was approved on November 13, 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, PTC kept $0.09.
- Revenue$1.46B100.0%
- Cost of revenue−$334.3M22.9%
- Gross profit$1.12B77.1%
- Operating costs−$913.3M62.6%
- Operating income$210.9M14.5%
- Interest, other & tax−$80.2M5.5%
- Net income$130.7M9.0%
Where FY2020 revenue went
$1.46B- Other operating costs: $656.7M, 45% of revenue
- Cost of revenue: $334.3M, 23% of revenue
- R&D: $256.6M, 18% of revenue
- Net income: $130.7M, 9.0% of revenue
- Interest, other & tax: $80.2M, 5.5% of revenue
Kept 9.0% as net incomeNet income $130.7M · 9.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed November 20, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $1.46B$1.26B | +16.1% |
| Cost of Revenue | $334.27M$325.38M | +2.7% |
| Gross Profit | $1.12B$930.25M | +20.8% |
| R&D Expenses | $256.57M$246.89M | +3.9% |
| Operating Expenses | $913.28M$867.21M | +5.3% |
| Operating Income | $210.86M$63.04M | +234.5% |
| Interest Expense | $76.43M$43.05M | +77.5% |
| Net Income | $130.69M-$27.46M | +575.9% |
| EPS (Basic) | $1.13$-0.23 | +591.3% |
| EPS (Diluted) | $1.12$-0.23 | +587.0% |
| Shares Outstanding (Basic) | 115.66M117.72M | −1.8% |
| Shares Outstanding (Diluted) | 116.27M117.72M | −1.2% |
05—Questions
Frequently Asked Questions
How did PTC's revenue and profitability change in fiscal 2020?
Total revenue increased 16% to $1,458.4 million, driven by a 26% increase in recurring revenue. GAAP operating income rose to $210.9 million from $63.0 million, and GAAP diluted EPS improved to $1.12 from a loss of $(0.23). The filing attributes the EPS increase to higher revenue and a lower effective tax rate.
What is driving ARR growth, and where is it weaker?
ARR grew 14% (11% constant currency) to $1,270 million. Growth Products ARR rose 34%, and Core (CAD and PLM) ARR grew 14%. FSG product ARR declined 2%, largely due to the non-renewal of a government contract and COVID-19 impacts on FSG markets.
How is PTC funding its debt and capital returns?
In February 2020 PTC issued $1 billion of Senior Notes (3.625% due 2025 and 4.000% due 2028) and used the proceeds to repay the 6.000% notes due 2024 and borrowings under its credit facility. Total debt was $1,018 million at September 30, 2020. The Board authorized a new $1 billion share repurchase program on November 13, 2020, through September 30, 2023, which may be funded with operating cash flow and credit facility borrowings.
What are the main risks highlighted in the filing?
Key risks include COVID-19 effects on customer demand, churn (8.6% in FY'20 versus 7.4% in FY'19), and professional services revenue, which declined 14%. Other risks include dependence on discrete manufacturing demand, the transition to subscription licensing, leverage and covenant compliance, cybersecurity incidents, and an open South Korean tax dispute with potential additional exposure of $17 million.
06—Continue