01—Abstract
Summary
Summary of the 10-K filed November 15, 2022. Cited figures are marked; the original filing is the authoritative source.
PTC Inc. reported fiscal 2022 (year ended September 30, 2022) revenue of $1.93 billiona, up 7% from $1.81 billion in FY'21 (11% in constant currency).
Operating income rose to $447.4 millionb from $380.7 million, and diluted EPS was $2.65 versus $4.03 in FY'21, which included a $68.8 million gain on an equity investment. Non-GAAP diluted EPS was $4.58, up from $3.97. Annual Recurring Revenue (ARR) reached $1,572.0 million, up 7% (16% constant currency).
Operating cash flow was $435.3 millionc and free cash flow was $415.8 million, up from $344.1 million the prior year. The company acquired the Codebeamer application lifecycle management business from Intland Software for a purchase price of $278.1 million net of cash acquired, and sold a portion of its PLM services business to ITC Infotech for approximately $60.4 million in total consideration. Total debt was $1.36 billion at September 30, 2022, including $1 billion of senior notes due 2025 and 2028 and $359 million drawn on the credit facility.
Management stated a long-term goal of returning about 50% of free cash flow to shareholders through share repurchases, and repurchased $125 milliond of stock in FY'22. A $1 billion repurchase authorization runs through September 30, 2023.
The company also reported a restructuring plan initiated in Q1 2022 that resulted in $33.1 million of charges, mainly for termination benefits for about 330 employees, and total headcount fell 3% to 6,503. Management identified its transition to SaaS as a major execution risk, and the filing notes that the Creo CAD product line declined 1% in software revenue, driven by currency headwinds in Europe.
02—Key points
Key Highlights
- Total revenue rose 7% to $1,933.3 million in FY'22; ARR increased 7% to $1,572.0 million (16% in constant currency).
- GAAP operating margin improved to 23.1% from 21.1%, and non-GAAP operating margin reached 37.9% versus 35.1%.
- GAAP diluted EPS fell to $2.65 from $4.03, mainly because FY'21 included a $68.8 million equity investment gain; non-GAAP diluted EPS rose 15% to $4.58.
- Free cash flow grew to $415.8 million from $344.1 million, supported by operating cash flow of $435.3 million.
- Acquired Codebeamer (Intland Software) for $278.1 million net of cash acquired and sold a portion of the PLM services business to ITC Infotech for about $60.4 million in total consideration.
- Total debt was $1.36 billion at year-end, with an aggregate interest rate of 3.9%; the company was in compliance with all credit facility and note covenants.
- Repurchased $125 million of common stock in FY'22, and the Board authorized up to $1 billion of repurchases through September 30, 2023.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, PTC kept $0.16.
- Revenue$1.93B100.0%
- Cost of revenue−$386.0M20.0%
- Gross profit$1.55B80.0%
- Operating costs−$1.10B56.9%
- Operating income$447.4M23.1%
- Interest, other & tax−$134.3M6.9%
- Net income$313.1M16.2%
Where FY2022 revenue went
$1.93B- Other operating costs: $761.2M, 39% of revenue
- Cost of revenue: $386.0M, 20% of revenue
- R&D: $338.8M, 18% of revenue
- Net income: $313.1M, 16% of revenue
- Interest, other & tax: $134.3M, 6.9% of revenue
Kept 16% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed November 15, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $1.93B$1.81B | +7.0% |
| Cost of Revenue | $385.98M$371.10M | +4.0% |
| Gross Profit | $1.55B$1.44B | +7.8% |
| R&D Expenses | $338.82M$299.92M | +13.0% |
| Operating Expenses | $1.10B$1.06B | +4.2% |
| Operating Income | $447.36M$380.75M | +17.5% |
| Interest Expense | $54.27M$50.48M | +7.5% |
| Net Income | $313.08M$476.92M | −34.4% |
| EPS (Basic) | $2.67$4.08 | −34.6% |
| EPS (Diluted) | $2.65$4.03 | −34.2% |
| Shares Outstanding (Basic) | 117.19M116.84M | +0.3% |
| Shares Outstanding (Diluted) | 118.23M118.37M | −0.1% |
05—Questions
Frequently Asked Questions
How did PTC perform financially in fiscal 2022?
Revenue was $1.93 billion, up 7% (11% in constant currency). Operating income was $447.4 million, up 17%, and GAAP diluted EPS was $2.65. Non-GAAP diluted EPS was $4.58, up from $3.97. Strengthening of the U.S. dollar was a substantial headwind to reported results.
What is driving PTC's recurring revenue and ARR?
ARR reached $1,572.0 million, up 7% (16% constant currency). Windchill ARR increased 10% (19% constant currency), Arena ARR rose 27%, and IIoT ARR increased 14% (21% constant currency). Creo ARR was flat (up 11% in constant currency). The Codebeamer acquisition added a point of constant-currency ARR growth.
How much debt does PTC carry and when does it mature?
Total debt was $1.36 billion at September 30, 2022, consisting of $500 million of 3.625% senior notes due 2025, $500 million of 4.000% senior notes due 2028, and $359 million outstanding under the credit facility, which matures February 13, 2025. Unused credit facility commitments were $641.0 million.
What are PTC's capital return plans?
PTC repurchased $125 million of stock in FY'22 and has a $1 billion repurchase authorization through September 30, 2023. Its long-term goal is to return approximately 50% of free cash flow to shareholders through share repurchases, though this may be reduced, suspended, or stopped depending on interest rates and strategic acquisitions.
What are the main risks highlighted in the filing?
Key risks include intense competition and the difficulty of transitioning to a SaaS model, which requires considerable investment and may not succeed as expected. Other risks cover cybersecurity breaches, dependence on third-party cloud providers, exposure to discrete manufacturing demand, currency fluctuations, acquisition integration, and the variable-rate credit facility tied to LIBOR.
06—Continue