01—Abstract
Summary
Summary of the 10-K filed November 20, 2023. Cited figures are marked; the original filing is the authoritative source.
PTC Inc. reported fiscal 2023 (year ended September 30, 2023) total revenue of $2.10 billiona, up 8% from $1.93 billion in fiscal 2022 (12% in constant currency).
Growth was driven mainly by the ServiceMax and Codebeamer acquisitions. Annual Run Rate (ARR) grew 26% to $1.98 billionb, and organic ARR, excluding ServiceMax, grew 15% to $1.81 billion. Net income fell to $245.5 million, or $2.06 diluted EPS, from $313.1 million and $2.65 a year earlier.
Non-GAAP diluted EPS was $4.34c, versus $4.58 in fiscal 2022. Operating income rose 2% to $458.5 million, and operating margin was 21.9% versus 23.1%. Cash flow from operations was $610.9 million, up from $435.3 million, and free cash flow was $587.0 million, up from $415.8 million.
The company reports over 90% of annual revenues as recurring. Cash and cash equivalents ended at $288.1 milliond. Gross debt was $1.70 billion at a weighted average rate of 5.2%, and interest expense rose to $129.4 million from $54.3 million, reflecting ServiceMax-related borrowings.
The filing notes a $620 million deferred ServiceMax payment liability, and a $650 million installment was paid in October 2023 using a revolver draw. In October 2023 the company also acquired pure-systems GmbH for approximately $98 million.
The filing describes significant risks, including cybersecurity exposure, reliance on third-party cloud providers, increased leverage, and an uncertain tax position charge of $21.8 million related to transfer pricing in a foreign jurisdiction. Management's internal control assessment concluded that controls were effective, with ServiceMax excluded from that assessment.
02—Key points
Key Highlights
- Total revenue of $2,097.1 million, up 8% (12% constant currency) from $1,933.3 million in fiscal 2022
- ARR of $1,978.6 million, up 26% (23% constant currency); organic ARR of $1.81 billion, up 15%
- GAAP diluted EPS of $2.06 versus $2.65 in fiscal 2022; non-GAAP diluted EPS of $4.34 versus $4.58
- Free cash flow of $587.0 million, up 41% from $415.8 million, on cash from operations of $610.9 million
- ServiceMax acquisition closed January 2023 with a total purchase price of $1,448.2 million net of cash acquired, paid in two installments
- Total debt of $1.70 billion with a 5.2% weighted average interest rate; interest expense rose to $129.4 million from $54.3 million
- Operating margin of 21.9% versus 23.1%; non-GAAP operating margin of 36.2% versus 37.9%, driven by higher operating expenses and amortization
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, PTC kept $0.12.
- Revenue$2.10B100.0%
- Cost of revenue−$441.0M21.0%
- Gross profit$1.66B79.0%
- Operating costs−$1.20B57.1%
- Operating income$458.5M21.9%
- Interest, other & tax−$212.9M10.2%
- Net income$245.5M11.7%
Where FY2023 revenue went
$2.10B- Other operating costs: $803.2M, 38% of revenue
- Cost of revenue: $441.0M, 21% of revenue
- R&D: $394.4M, 19% of revenue
- Net income: $245.5M, 12% of revenue
- Interest, other & tax: $212.9M, 10% of revenue
Kept 12% as net incomeNet income $245.5M · 12%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed November 20, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $2.10B$1.93B | +8.5% |
| Cost of Revenue | $441.01M$385.98M | +14.3% |
| Gross Profit | $1.66B$1.55B | +7.0% |
| R&D Expenses | $394.37M$338.82M | +16.4% |
| Operating Expenses | $1.20B$1.10B | +8.9% |
| Operating Income | $458.47M$447.36M | +2.5% |
| Interest Expense | $129.42M$54.27M | +138.5% |
| Net Income | $245.54M$313.08M | −21.6% |
| EPS (Basic) | $2.07$2.67 | −22.5% |
| EPS (Diluted) | $2.06$2.65 | −22.3% |
| Shares Outstanding (Basic) | 118.34M117.19M | +1.0% |
| Shares Outstanding (Diluted) | 119.33M118.23M | +0.9% |
05—Questions
Frequently Asked Questions
What drove revenue growth in fiscal 2023?
Revenue grew 8% (12% constant currency), primarily due to contributions from the ServiceMax and Codebeamer acquisitions. Professional services revenue declined 8% as the company shifted delivery to partners and sold part of its PLM services business in fiscal 2022.
Why did GAAP net income and EPS decline?
Net income fell to $245.5 million from $313.1 million. The filing attributes the increase in interest expense to debt and liabilities tied to the ServiceMax acquisition, including $30 million of imputed interest. Income tax expense also included a $21.8 million charge for an uncertain transfer pricing tax position, and the prior year benefited from $36 million of gains on asset sales.
How is the company's debt position after the ServiceMax acquisition?
As of September 30, 2023, total debt was $1.70 billion, including $1 billion of Senior Notes due 2025 and 2028 and $702 million under the credit facility. A $620 million deferred acquisition payment liability was recorded and paid in October 2023. Subsequent to year-end, the company borrowed $739.8 million on its revolver, including $650 million for the ServiceMax payment and $89.8 million for the pure-systems acquisition.
What does the filing say about the company's recurring revenue and subscription transition?
The company states that over 90% of its annual revenues are recurring in nature. Recurring revenue was $1,907.9 million in fiscal 2023, up from $1,736.2 million. The filing says SaaS adoption in CAD and PLM is expected to be gradual at first and then accelerate significantly.
What are the main risks highlighted in the filing?
Key risks include intense competition, cybersecurity breaches and cloud service provider disruptions, dependence on discrete manufacturing demand, the transition to SaaS, integration of acquisitions, leverage and covenant compliance under its debt agreements, foreign currency exposure, and tax liabilities.
06—Continue