Strong Start to FY’17 with Bookings and Subscription Bookings Mix Both Exceeding the High End of Guidance

NEEDHAM, Mass. — (BUSINESS WIRE) — January 18, 2017 — PTC (NASDAQ: PTC) today reported financial results for the first quarter ended December 31, 2016.

Overview
First quarter FY’17 GAAP revenue was $286 million; non-GAAP revenue was $287 million. We recorded a GAAP net loss of $9 million or $0.08 per share; non-GAAP net income was $31 million or $0.26 per share.

“Despite foreign currency headwinds, bookings of $90 million and subscription bookings mix of 65% demonstrate a continuation of the momentum we have been building over the past year,” said James Heppelmann, President and CEO, PTC. “In particular, we are very pleased with the first quarter results of our IoT business, which continued to capitalize on our technology and market leadership to deliver bookings well above our expectations. Continued improvements in focus and execution drove solid performance in our Solutions business, led by CAD bookings growth in the double-digits.”

Heppelmann added, “Note that there were significant changes in foreign currencies since we provided guidance in October 2016. Despite these currency headwinds, we are maintaining our FY’17 bookings guidance due to the Q1’17 over performance, and we are reducing revenue and EPS guidance by less than the estimated currency impact.”

Heppelmann continued, “We remain focused on creating significant long-term value for our customers and shareholders through our transition to a subscription business model. It is important to note that a higher subscription mix relative to guidance for the current quarter negatively impacts near-term reported revenue and earnings, as we will record a greater proportion of our revenue on a ratable basis.”

Operating and Financial Overview
Q1’17 operating and financial highlights are set forth below. For additional details, please refer to the prepared remarks and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com. Information about our bookings and other reporting measures is provided on page 4.

• Q1’17 license and subscription bookings were $90 million, up 31% YoY, and above the high end of the guidance range of $70 million to $80 million. Changes in foreign currencies, since guidance was provided in October 2016, had a negative $2 million impact on reported bookings. Bookings results were driven by strong performance in IoT, including one IoT mega deal (>$5m in bookings) and one IoT large deal (>$1m in bookings), as well as solid execution within our Solutions business, led by low-teens constant currency bookings growth in CAD.
• Q1’17 subscription annualized contract value (ACV) was $29 million, up 177% YoY and above our guidance range of $19 million to $22 million.
• Q1’17 subscription bookings were 65% of total bookings, above our guidance assumption of 55% and up from 28% in Q1’16. For Q1’17, we estimate that this higher-than-guidance mix of subscription in the quarter, while positive in the long-term, reduced both GAAP and non-GAAP revenue by approximately $9 million and reduced non-GAAP EPS by approximately $0.08 as compared to our guidance, and reduced non-GAAP EPS by approximately $0.27 as compared to Q1’16 subscription mix.
• Strong subscription results contributed to a significant increase in our total deferred revenue – billed plus unbilled, which increased year over year by $248 million, or 43%, to $825 million as of the end of Q1’17.
• Q1’17 GAAP software revenue was approximately $240 million and non-GAAP software revenue was approximately $241 million. These results reflect a higher mix of subscription than last year, and were both down approximately 0.5% year over year and 1% year over year in constant currency. We estimate that the higher mix of subscription than last year reduced both GAAP and non-GAAP Q1’17 software revenue by approximately $34 million or 14%.
• Annualized recurring revenue (ARR) was approximately $819 million for Q1’17, an increase of 9% year-over-year.
• Q1’17 GAAP operating expenses were approximately $200 million; non-GAAP operating expenses were approximately $170 million.
• Q1’17 GAAP operating margin was 2% and non-GAAP operating margin was 15%, which compares to Q1’16 GAAP operating margin of (5%) and non-GAAP operating margin of 21%. We estimate that the higher mix of subscription in Q1’17 reduced non-GAAP operating margin by approximately 260 basis points as compared to guidance mix, and reduced non-GAAP operating margin by approximately 900 basis points as compared to the Q1’16 subscription mix.
• For Q1’17, we recorded a GAAP income tax expense of $3 million, or $0.02 per share; non-GAAP income tax expense was $2 million, or $0.02 per share. The GAAP tax rate for the quarter was (41%) and the non-GAAP tax rate for the quarter was 8%.
• Cash flow used by operations for Q1’17 was ($48) million, and free cash flow was ($55) million, both of which include cash payments for restructuring of $16 million.
• We ended the quarter with total cash, cash equivalents, and marketable securities of $223 million and total debt, net of deferred issuance costs, of $728 million.