Revenue and EPS Exceed High End of Guidance; Raises Revenue, EPS, and Free Cash Flow Guidance

NEEDHAM, Mass. — (BUSINESS WIRE) — April 18, 2018 — PTC (NASDAQ: PTC) today reported financial results for its fiscal second quarter ended March 31, 2018.

• Second quarter total revenue was $308 million
• Second quarter GAAP net income was $8 million or $0.07 per diluted share; non-GAAP net income was $40 million or $0.34 per diluted share
• Second quarter license and subscription bookings were $99 million and subscription mix was 78%
• Total deferred revenue, billed and unbilled, was $1.26 billion, an increase of 43% from the same period last year
• Second quarter subscription Annualized Recurring Revenue (ARR) was $453 million, an increase of $188 million or 71% from the same period last year

“Our second quarter results were a continuation of the strong performance we have been driving across our product portfolio,” said James Heppelmann, President and CEO, PTC. “Total revenue, operating margin and EPS all exceeded the high end of our guidance, and new bookings were at the midpoint of our guidance range.”

Heppelmann added, “We are pleased with our second quarter performance and are raising fiscal 2018 revenue, EPS and free cash flow guidance. For the first half of the fiscal year, CAD bookings grew double-digits, far outpacing market growth, PLM bookings grew at market, ThingWorx continued to set the standard for Industrial Innovation Platforms, and interest in our augmented reality (AR) solutions accelerated.”

Additional second 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.

• Q2’18 license and subscription bookings were $99 million, up 4% year over year, despite one large Q2 forecasted deal that did not close until the beginning of Q3. On a year-to-date basis, bookings were $203 million, up 10% year over year, and the subscription mix was 72%.
• Q2’18 GAAP software revenue was $262 million and non-GAAP software revenue was $263 million, an increase of 12% year over year in each case, despite a 700 basis point increase in the subscription mix compared to the same period last year.
• Approximately 91% of second quarter software revenue came from recurring revenue streams, up from 88% in the same period last year.
• Annualized Recurring Revenue (ARR) was $961 million, an increase of 15% year over year and the fifth consecutive quarter of double-digit growth.
• Total deferred revenue – billed and unbilled - increased $382 million or 43% year-over-year and increased $94 million or 8% sequentially to $1.26 billion. Billed deferred revenue increased 1% year-over year and 15% sequentially, to $498 million. 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. Q2’18 ended on March 31st this year, as opposed to April 1st for Q2’17. Recurring revenue billings on April 1, 2018 were approximately $79 million, so had Q2’18 ended on April 1, billed deferred revenue would have grown approximately 17% year over year.
• GAAP professional services gross margin in the second quarter was 17% compared to 14% in the same period last year; non-GAAP professional services gross margin was 21% compared to 18% in the same period last year.
• GAAP operating margin in the second quarter was 7%, compared to 3% in the same period last year; non-GAAP operating margin was 18%, compared to 16% in the same period last year.
• Operating cash flows in the second quarter were $111 million compared to $76 million in the same period last year and free cash flow was $106 million compared to $69 million in the same period last year, an increase of 54%; second quarter operating cash flows and free cash flow include cash payments of approximately $1 million related to our October 2015 restructuring plan, compared to $13 million in the same period last year.
• Total cash, cash equivalents, and marketable securities as of the end of the second quarter were $355 million and total debt, net of deferred issuance costs, was $643 million. During the quarter, we repaid approximately $100 million of debt.
• As part of our previously announced share repurchase program, we plan to enter into a $100 million accelerated stock repurchase agreement on April 20, 2018, and expect that the repurchase will be completed by the end of our fiscal Q3 2018.