01—Abstract
Summary
Summary of the 10-Q filed May 3, 2024. Cited figures are marked; the original filing is the authoritative source.
PTC Inc.'s second-quarter fiscal 2024 results (quarter ended March 31, 2024) showed revenue of $603.1 milliona, up 11% (11% in constant currency) from $542.2 million a year earlier.
Net income was $114.4 millionb, or $0.95 per diluted share, compared with $63.5 million, or $0.53, in the prior-year quarter. Operating income was $179.6 million, and operating margin rose to 29.8% from 22.6%, which the company attributes to higher revenue, continued operating discipline, and lower acquisition- and transaction-related costs. Annual Run Rate (ARR) reached $2.09 billion, up 11% (12% in constant currency), with growth in both the CAD and PLM product groups across all regions.
Cash flow was strong. Cash provided by operating activities grew 19% to $251 millionc in the quarter, and free cash flow grew 19% to $247 million. For the first six months, operating cash flow was $438.1 million, versus $391.9 million a year earlier.
The company settled the $620.0 milliond ServiceMax deferred acquisition payment in the period and acquired pure-systems GmbH for $93.5 million, net of cash acquired. These outlays were funded largely by net borrowings on the revolving credit facility. Total debt was $2,010.9 million at March 31, 2024, against cash and cash equivalents of $249.0 million.
The company expects to use substantially all operating cash flow over the rest of fiscal 2024 to repay revolver borrowings. Of $514.7 million of debt classified as current, $499.1 million relates to the 3.625% senior notes due in 2025. The company also reported a $2.0 million impairment on a Level 3 convertible note, a non-cash $3.6 million tax reserve charge in a foreign jurisdiction, and the first phase of a new corporate ERP implementation during the quarter.
Management stated that its disclosure controls were effective as of March 31, 2024. Remaining performance obligations totaled $2,053.5 million, with approximately 60% expected to be recognized over the next 12 months.
02—Key points
Key Highlights
- Q2 FY2024 revenue of $603.1 million, up 11% from $542.2 million in Q2 FY2023; software revenue of $570.8 million.
- Net income of $114.4 million ($0.95 diluted EPS) in Q2, versus $63.5 million ($0.53) a year earlier; six-month net income of $180.8 million ($1.50 diluted EPS).
- Operating margin of 29.8% in Q2, up from 22.6%; non-GAAP operating margin of 42.1%, versus 38.2% a year earlier.
- ARR of $2.09 billion, up 11% (12% constant currency), driven by CAD and PLM growth across all regions.
- Free cash flow of $247.1 million in Q2 (up 19%); six-month operating cash flow of $438.1 million versus $391.9 million.
- Total debt of $2,010.9 million at March 31, 2024; $620.0 million ServiceMax deferred payment settled, and $514.7 million of debt classified as current, including the 2025 senior notes.
- Remaining performance obligations of $2,053.5 million, with approximately 60% expected to be recognized over the next 12 months.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, PTC kept $0.19.
- Revenue$603.1M100.0%
- Cost of revenue−$110.1M18.2%
- Gross profit$493.0M81.8%
- Operating costs−$313.5M52.0%
- Operating income$179.6M29.8%
- Interest, other & tax−$65.1M10.8%
- Net income$114.4M19.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed May 3, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $603.07M$542.18M | +11.2% |
| Cost of Revenue | $110.06M$113.51M | −3.0% |
| Gross Profit | $493.02M$428.68M | +15.0% |
| R&D Expenses | $107.00M$100.35M | +6.6% |
| Operating Expenses | $313.46M$306.14M | +2.4% |
| Operating Income | $179.56M$122.54M | +46.5% |
| Interest Expense | $31.60M$41.52M | −23.9% |
| Net Income | $114.44M$63.50M | +80.2% |
| EPS (Basic) | $0.96$0.54 | +77.8% |
| EPS (Diluted) | $0.95$0.53 | +79.2% |
| Shares Outstanding (Basic) | 119.59M118.26M | +1.1% |
| Shares Outstanding (Diluted) | 120.71M119.04M | +1.4% |
05—Questions
Frequently Asked Questions
How did PTC's revenue and profitability perform in the second quarter of fiscal 2024?
Total revenue rose 11% to $603.1 million, driven by software revenue growth in Creo, Windchill, and Codebeamer. Operating income increased to $179.6 million from $122.5 million, and operating margin rose to 29.8% from 22.6%. Net income was $114.4 million, or $0.95 per diluted share, compared with $63.5 million, or $0.53, a year earlier.
What is driving the growth in ARR?
ARR grew 11% (12% constant currency) to $2.09 billion as of the end of Q2 FY2024. The company attributes the growth to both the CAD and PLM product groups and to all regions. PLM ARR grew 12%, driven primarily by Windchill, Codebeamer, and ServiceMax, while CAD ARR grew 9%, driven primarily by Creo.
How did PTC's debt and liquidity position change?
Total debt was $2,010.9 million at March 31, 2024, up from $1,702.0 million at September 30, 2023. The increase reflects revolver borrowings used to settle the $620.0 million ServiceMax deferred payment and to fund the $93.5 million pure-systems acquisition. Cash and cash equivalents were $249.0 million. The company was in compliance with all covenants, and $736.0 million of the revolver was unused. Management expects to use substantially all operating cash flow over the rest of fiscal 2024 to repay revolver debt.
What are the main risks or one-time items disclosed in the quarter?
The company recorded a $2.0 million impairment loss on a Level 3 convertible note and a non-cash $3.6 million tax expense related to a tax reserve in a foreign jurisdiction. The filing also notes that the 2025 senior notes will become due in February 2025, and that the credit facility could become payable on November 16, 2024 if those notes are not refinanced or redeemed by that date. The filing also notes that the macroeconomic environment, interest rates, and foreign exchange rates could affect customer purchases and results.
06—Continue