01—Abstract
Summary
Summary of the 10-Q filed August 2, 2024. Cited figures are marked; the original filing is the authoritative source.
PTC Inc. reported results for its fiscal third quarter and first nine months of fiscal 2024 (ended June 30, 2024) in this Form 10-Q.
Total revenue for the quarter was $518.6 milliona, down from $542.3 million a year earlier, driven by lower on-premises subscription license revenue due to shorter contract durations and a higher proportion of ratably recognized SaaS contracts. Diluted EPS rose to $0.57 from $0.51, primarily because of a non-cash tax benefit tied to IRS procedural guidance issued in May 2024 and lower total expenses. Operating income for the quarter was $95.8 million versus $109.9 million, and net income was $69.0 million versus $61.4 million.
For the nine months, total revenue was $1,671.9 millionb compared with $1,550.4 million, and operating income was $394.1 million compared with $337.3 million. Management reported ARR of $2,126.1 million, up 10% (12% in constant currency) from a year earlier. Cash provided by operating activities for the nine months was $651.9 million, and free cash flow was $642.0 million, based on the company's non-GAAP reconciliation.
On the balance sheet, total debt stood at $1,815.8 millionc at June 30, 2024, with $518.1 million classified as current, including $499.3 million tied to the 2025 senior notes that become due in February 2025. The company used $620.0 million in cash during the period to settle the deferred ServiceMax acquisition payment, funded partly through net revolver borrowings. Management expects to use substantially all operating cash flow for the rest of fiscal 2024 to repay revolver debt.
02—Key points
Key Highlights
- Total revenue of $518.6 million for Q3'24, down from $542.3 million in Q3'23; nine-month revenue rose to $1,671.9 million from $1,550.4 million
- ARR grew 10% (12% constant currency) to $2,126.1 million as of June 30, 2024
- Diluted EPS of $0.57 for Q3'24 versus $0.51, aided by a non-cash tax benefit from IRS procedural guidance; nine-month diluted EPS was $2.07 versus $1.68
- Nine-month net cash provided by operating activities of $651.9 million and free cash flow of $642.0 million, both up from the prior-year period
- Total debt of $1,815.8 million at June 30, 2024, with $518.1 million classified as current, including the 2025 senior notes due February 2025
- Paid $620.0 million to settle the ServiceMax deferred acquisition payment and acquired pure-systems for $93.5 million, net of cash acquired
- Management expects to use substantially all operating cash flow for the remainder of FY'24 to repay revolver debt
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, PTC kept $0.13.
- Revenue$518.6M100.0%
- Cost of revenue−$111.9M21.6%
- Gross profit$406.7M78.4%
- Operating costs−$310.9M59.9%
- Operating income$95.8M18.5%
- Interest, other & tax−$26.8M5.2%
- Net income$69.0M13.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed August 2, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $518.64M$542.34M | −4.4% |
| Cost of Revenue | $111.92M$115.85M | −3.4% |
| Gross Profit | $406.72M$426.49M | −4.6% |
| R&D Expenses | $110.25M$103.82M | +6.2% |
| Operating Expenses | $310.90M$316.59M | −1.8% |
| Operating Income | $95.82M$109.90M | −12.8% |
| Interest Expense | $27.80M$35.84M | −22.4% |
| Net Income | $68.98M$61.40M | +12.3% |
| EPS (Basic) | $0.58$0.52 | +11.5% |
| EPS (Diluted) | $0.57$0.51 | +11.8% |
| Shares Outstanding (Basic) | 119.89M118.48M | +1.2% |
| Shares Outstanding (Diluted) | 120.82M119.39M | +1.2% |
05—Questions
Frequently Asked Questions
Why did revenue decline in the third quarter even though ARR grew?
Q3'24 revenue fell 4% to $518.6 million, driven by lower on-premises subscription license revenue due to shorter contract durations and a larger share of ratably recognized SaaS contracts. Because ARR is an annualized run-rate measure rather than recognized revenue, it is not affected by the timing of revenue recognition under ASC 606.
What drove the increase in diluted EPS despite lower revenue?
Diluted EPS grew to $0.57 from $0.51 in Q3'24, primarily due to a non-cash tax benefit associated with IRS procedural guidance issued in May 2024 and a reduction in total expenses, partially offset by lower revenue. The filing notes the benefit will reverse in a future fiscal period if the company receives IRS consent for a change in treatment of certain deductions.
How is PTC's debt position changing?
Total debt was $1,815.8 million at June 30, 2024, up from $1,702.0 million at September 30, 2023, after net revolver borrowings used to fund the ServiceMax deferred payment and the pure-systems acquisition. The 2025 senior notes of $500.0 million are classified as current, and the company is in compliance with its covenants.
What are the main operating expense changes this year?
For the nine months, operating expenses rose to $945.8 million from $887.9 million, mainly from a $44 million increase in compensation expense tied to the ServiceMax acquisition, higher headcount, and salary increases, plus a $13 million rise in stock-based compensation and an $8 million increase in outside services. These were partly offset by a $16 million decrease in acquisition costs and a $10 million decrease in marketing expense.
06—Continue