First Quarter Bookings and Revenue Exceed High End of Guidance Range

NEEDHAM, Mass. — (BUSINESS WIRE) — January 17, 2018 — PTC (NASDAQ: PTC) today reported financial results for its fiscal first quarter ended December 30, 2017.

• First quarter FY’18 total revenue was $307 million
• First quarter GAAP net income was $14 million or $0.12 per diluted share; non-GAAP net income was $36 million or $0.31 per diluted share
• First quarter license and subscription bookings were $104 million and subscription mix was 67%
• Total deferred revenue, billed and unbilled, was $1.17 billion, an increase of 42% from the same period last year
• First quarter subscription Annualized Recurring Revenue (ARR) was $402 million, an increase of $183 million or 84% from the same period last year

“We are very pleased with our first quarter fiscal 2018 results and the continuing momentum we see in our business,” said James Heppelmann, President and CEO, PTC. “Bookings of $104 million exceeded the high end of our guidance range by $12 million, powered by large strategic wins in our Solutions business with marquee customers like BMW, momentum in our IoT business where we had five deals with bookings of over $1 million, and strength in the channel.”

Heppelmann added, “This is a strong start to fiscal year 2018 with broad-based strength both geographically and across our product portfolio. CAD, PLM, and IoT performed above our expectations, while the demand environment, particularly for our subscription offerings, remains strong around the globe. Given the strong start, we are raising our FY’18 guidance.”

Additional first quarter operating and financial highlights are set forth below. Information about our bookings and other reporting measures is provided beginning on page four. 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.

• Q1’18 license and subscription bookings were $104 million, up 16% year-over-year.
• Total bookings in the first quarter exceeded the high end of our guidance by $12 million and subscription bookings comprised 67% of total bookings. We believe that the announced discontinuation of new perpetual license sales in the Americas and Western Europe led to an increase in perpetual license purchases of approximately $4 million in the quarter, which impacted the subscription mix by approximately 3 percentage points.
• Total deferred revenue – billed and unbilled - increased $344 million or 42% year-over-year and increased $77 million or 7% sequentially to $1.17 billion. Billed deferred revenue increased 15% year-over year and declined 6% sequentially, as expected, to $431 million, due to the timing of support billings during the year. Billed deferred revenue can fluctuate quarterly based upon the contractual billings dates in our recurring revenue contracts, as well as the timing of our fiscal reporting periods.
• GAAP and non-GAAP software revenue in the first quarter were both approximately $265 million, an increase of 10% year-over-year, despite a higher mix of subscription bookings than the same period last year.
• Approximately 87% of first quarter GAAP and non-GAAP software revenue came from recurring revenue streams.
• Annualized Recurring Revenue (ARR) was approximately $928 million, an increase of 13% year-over-year and the fourth consecutive quarter of double-digit growth.
• GAAP operating expenses in the first quarter were approximately $206 million, compared to $200 million in the same period last year; non-GAAP operating expenses were approximately $183 million, compared to $170 million in the same period last year.
• GAAP operating margin in the first quarter was 6%, compared to 2% in the same period last year; non-GAAP operating margin was 17%, compared to 15% in the same period last year.
• Operating cash flows in the first quarter were $25 million, and free cash flow was $19 million, ahead of our expectations, and both include cash payments related to our October 2015 restructuring plan of approximately $1 million.
• Total cash, cash equivalents, and marketable securities as of the end of the first quarter was $342 million and total debt, net of deferred issuance costs, was $743 million.
• On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act, which significantly changed the existing U.S. tax laws, including a reduction in the corporate tax rate from 35% to 21%, and a move from a worldwide tax system to a territorial system. We have recorded the impact of this legislation in our Q1 GAAP earnings, resulting in a non-cash tax benefit of approximately $7 million. In addition, we recorded a non-cash tax benefit of approximately $0.5 million related to the new stock-based compensation accounting guidance. We have adjusted our balance sheet accounts accordingly and excluded these benefits from our non-GAAP results.
• Continuing the phased global rollout of our subscription licensing model, we separately announced that new software licenses for our core solutions and ThingWorx industrial innovation platform will be available globally only by subscription, effective January 1, 2019, with a few exceptions. Those exceptions apply to China, Korea, Taiwan, Russia, Turkey and India where we have not announced the end-of-life of perpetual licenses. Also, Kepware will continue to be available under perpetual licensing. We previously announced the transition to subscription-only licensing in the Americas and Western Europe effective January 1, 2018. Customers globally will be able to continue to use their existing perpetual licenses and renew support on active licenses.