01—Abstract
Summary
Summary of the 10-Q filed February 2, 2024. Cited figures are marked; the original filing is the authoritative source.
PTC Inc. filed its Form 10-Q for the quarter ended December 31, 2023 (first quarter of fiscal 2024).
Total revenue rose to $550.2 milliona from $465.9 million in the prior-year quarter, with total recurring revenue of $506.0 million and ARR of $2,057.2 million, up 24% (23% in constant currency). Management attributes ARR growth largely to the ServiceMax acquisition, which closed in Q2 2023, alongside organic growth in both the CAD and PLM product groups. Organic ARR grew 13% year over year to $1.88 billion.
Profitability was mixed. Operating income increased to $118.7 millionb from $104.9 million, but net income declined to $66.4 million from $75.0 million, and diluted EPS fell to $0.55 from $0.63. Interest and debt premium expense more than doubled to $35.3 million from $16.4 million, reflecting higher debt balances and interest rates.
The effective tax rate rose to 22% from 13%, including a $3.6 millionc non-cash tax reserve charge in a foreign jurisdiction. Non-GAAP diluted EPS was $1.11 versus $0.99. Cash from operations was $187.3 million, and free cash flow was $182.8 million.
Balance sheet leverage increased substantially. Total debt rose to $2,266.5 milliond from $1,702.0 million, driven by borrowings under the revolving credit facility used to settle the $650.0 million ServiceMax deferred acquisition payment and to fund the $93.5 million pure-systems acquisition completed in October 2023. Management expects to use substantially all operating cash flow over the rest of fiscal 2024 to repay revolver borrowings.
02—Key points
Key Highlights
- Total revenue of $550.2 million, up from $465.9 million; software revenue of $514.5 million, up from $430.4 million.
- ARR of $2,057.2 million, up 24% year over year (23% constant currency); organic ARR up 13% to $1.88 billion.
- Operating income of $118.7 million versus $104.9 million; non-GAAP operating margin of 36.2% versus 35.6%.
- Net income of $66.4 million versus $75.0 million; diluted EPS of $0.55 versus $0.63, while non-GAAP diluted EPS rose to $1.11 from $0.99.
- Interest and debt premium expense rose to $35.3 million from $16.4 million on higher debt and interest rates; the effective tax rate was 22% versus 13%.
- Total debt increased to $2,266.5 million from $1,702.0 million after revolver borrowings funded the ServiceMax deferred payment and the pure-systems acquisition.
- Free cash flow of $182.8 million, compared with $171.7 million in the prior-year quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, PTC kept $0.12.
- Revenue$550.2M100.0%
- Cost of revenue−$110.0M20.0%
- Gross profit$440.2M80.0%
- Operating costs−$321.5M58.4%
- Operating income$118.7M21.6%
- Interest, other & tax−$52.3M9.5%
- Net income$66.4M12.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed February 2, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $550.21M$465.91M | +18.1% |
| Cost of Revenue | $110.02M$95.79M | +14.9% |
| Gross Profit | $440.19M$370.12M | +18.9% |
| R&D Expenses | $105.78M$88.18M | +20.0% |
| Operating Expenses | $321.48M$265.22M | +21.2% |
| Operating Income | $118.71M$104.90M | +13.2% |
| Interest Expense | $35.30M$16.36M | +115.8% |
| Net Income | $66.39M$75.03M | −11.5% |
| EPS (Basic) | $0.56$0.64 | −12.5% |
| EPS (Diluted) | $0.55$0.63 | −12.7% |
| Shares Outstanding (Basic) | 119.12M117.82M | +1.1% |
| Shares Outstanding (Diluted) | 120.25M118.79M | +1.2% |
05—Questions
Frequently Asked Questions
How did PTC's revenue and ARR grow this quarter?
Total revenue rose to $550.2 million from $465.9 million, and ARR reached $2,057.2 million, up 24% year over year. Management attributes the growth primarily to the ServiceMax acquisition and to organic growth in Creo and Windchill, with organic ARR growing 13%.
Why did net income decline even though operating income increased?
Interest and debt premium expense more than doubled to $35.3 million from $16.4 million, and the provision for income taxes rose to $19.2 million from $11.4 million, including a $3.6 million non-cash tax reserve charge. Together these offset the higher operating income.
How did PTC fund the ServiceMax and pure-systems acquisitions?
PTC settled the $650.0 million ServiceMax deferred acquisition payment in October 2023, of which $620.0 million was purchase consideration and $30.0 million was imputed interest, and borrowed under its revolving credit facility. It also borrowed €85 million on the revolver to fund the pure-systems acquisition, which cost $93.5 million net of cash acquired.
What are PTC's debt obligations and near-term repayment plans?
Total debt was $2,266.5 million at December 31, 2023, including $500 million of 4.000% notes due 2028, $500 million of 3.625% notes due 2025, a $766.5 million revolver balance, and a $500 million term loan. The term loan begins amortizing in March 2024, and management expects to use substantially all operating cash flow for the rest of fiscal 2024 to repay revolver debt.
Did PTC change its capital return or workforce in this period?
The filing states that headcount rose 11% between Q1'23 and Q1'24, mainly due to the ServiceMax acquisition. It also notes that cash flow is expected to go toward debt repayment, and that share repurchases depend on free cash flow and the credit facility limits, while the forward-looking statements reference a goal of returning 50% of free cash flow to shareholders via share repurchases.
06—Continue