PTC Announces Fiscal Fourth Quarter And Full Year 2021 Results

We believe ARR is a valuable operating metric to measure the health of a subscription business because it captures expected subscription and support cash generation from customers.

Forward-Looking Statements
Statements in this press release that are not historic facts, including statements about our future financial and growth expectations and targets, and potential stock repurchases, are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include: the macroeconomic and/or global manufacturing climates may not improve when or as we expect, or may deteriorate, due to, among other factors, the COVID-19 pandemic, which could cause customers to delay or reduce purchases of new software, reduce the number of subscriptions they carry, or delay payments to us, all of which would adversely affect ARR and our financial results, including cash flow; our businesses, including our SaaS businesses, may not expand and/or generate the revenue or ARR we expect if customers are slower to adopt our technologies than we expect or if they adopt competing technologies; our strategic initiatives and investments, including our restructuring and our accelerated investments in our transition to SaaS, may not deliver the results when or as we expect; we may be unable to generate sufficient operating cash flow to repay amounts under our credit facility or to return 50% of free cash flow to shareholders, and other uses of cash or our credit facility limits or other matters could preclude such repayment and/or repurchases; foreign exchange rates may differ materially from those we expect; and orders associated with minimum commitments under our Strategic Alliance Agreement with Rockwell Automation may not result in subscription contracts sold through to end-user customers, which could cause the ARR associated with those orders to churn. In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including the geographic mix of our revenue, expenses, and profits. Other risks and uncertainties that could cause actual results to differ materially from those projected are detailed from time to time in reports we file with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

About PTC (NASDAQ: PTC)
PTC unleashes industrial innovation with award-winning, market-proven solutions that enable companies to differentiate their products and services, improve operational excellence, and increase workforce productivity. With PTC and its partner ecosystem manufacturers can capitalize on the promise of today's new technology to drive digital transformation.

PTC.com @PTC Blogs

¹ We include operating and non-GAAP financial measures in our operational highlights. The detailed definitions of these items and reconciliations of Non-GAAP financial measures to comparable GAAP measures are included below and in the reconciliation tables at the end of this press release.

PTC Investor Relations Contact
Matt Shimao
SVP, Investor Relations
mshimao@ptc.com
investor@ptc.com

PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)


	Three Months Ended				Twelve Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020

Revenue:
Recurring revenue	$	429,350	$	350,097	$	1,616,328	$	1,281,949
Perpetual license		10,369		8,680		33,013		32,668
Professional services		40,937		32,204		157,818		143,798
Total revenue ⁽¹⁾		480,656		390,981		1,807,159		1,458,415

Cost of revenue ⁽²⁾		99,748		84,615		371,102		334,271

Gross margin		380,908		306,366		1,436,057		1,124,144

Operating expenses:
Sales and marketing ⁽²⁾		129,464		115,815		517,779		435,451
Research and development ⁽²⁾		78,403		69,884		299,917		256,575
General and administrative ⁽²⁾		48,589		45,931		206,006		159,826
Amortization of acquired intangible assets		7,688		7,346		29,396		28,713
Restructuring and other charges, net		1,627		378		2,211		32,716
Total operating expenses		265,771		239,354		1,055,309		913,281

Operating income		115,137		67,012		380,748		210,863
Other income (expense), net		54,385		(11,631)		11,007		(76,157)
Income before income taxes		169,522		55,381		391,755		134,706
Provision (benefit) for income taxes		(123,421)		1,975		(85,168)		4,011
Net income	$	292,943	$	53,406	$	476,923	$	130,695

Earnings per share:
Basic	$	2.50	$	0.46	$	4.08	$	1.13
Weighted average shares outstanding		117,230		116,069		116,836		115,663

Diluted	$	2.46	$	0.46	$	4.03	$	1.12
Weighted average shares outstanding		118,921		117,097		118,367		116,267

(1)

See supplemental financial data for revenue by license, support, and professional services.

(2)

See supplemental financial data for additional information about stock-based compensation.




PTC Inc.
SUPPLEMENTAL FINANCIAL DATA FOR REVENUE AND STOCK-BASED COMPENSATION
(in thousands, except per share data)


Revenue by license, support and services is as follows:
	Three Months Ended				Twelve Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
License revenue ⁽¹⁾	$	199,284	$	140,507	$	738,053	$	509,792
Support and cloud services revenue		240,435		218,270		911,288		804,825
Professional services revenue		40,937		32,204		157,818		143,798
Total revenue	$	480,656	$	390,981	$	1,807,159	$	1,458,415

(1) License revenue includes the portion of subscription revenue allocated to license.

The amounts in the income statement include stock-based compensation as follows:

	Three Months Ended				Twelve Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Cost of revenue	$	5,229	$	4,761	$	19,263	$	13,969
Sales and marketing		11,179		13,346		53,712		37,351
Research and development		9,394		9,725		34,272		27,005
General and administrative		17,591		13,712		70,042		36,824
Total stock-based compensation	$	43,393	$	41,544	$	177,289	$	115,149




PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)

		Three Months Ended						Twelve Months Ended
		September 30,			September 30,			September 30,			September 30,
		2021			2020			2021			2020

GAAP gross margin		$	380,908		$	306,366		$	1,436,057		$	1,124,144
Stock-based compensation			5,229			4,761			19,263			13,969
Amortization of acquired intangible assets included in cost of revenue			8,125			6,856			29,769			27,391
Non-GAAP gross margin		$	394,262		$	317,983		$	1,485,089		$	1,165,504

GAAP operating income		$	115,137		$	67,012		$	380,748		$	210,863
Stock-based compensation			43,393			41,544			177,289			115,149
Amortization of acquired intangible assets included in cost of revenue			8,125			6,856			29,769			27,391
Amortization of acquired intangible assets			7,688			7,346			29,396			28,713
Acquisition-related and other transactional charges included in general and administrative costs			166			552			15,010			8,616
Restructuring and other charges, net			1,627			378			2,211			32,716
Non-GAAP operating income ⁽¹⁾		$	176,136		$	123,688		$	634,423		$	423,448

GAAP net income		$	292,943		$	53,406		$	476,923		$	130,695
Stock-based compensation			43,393			41,544			177,289			115,149
Amortization of acquired intangible assets included in cost of revenue			8,125			6,856			29,769			27,391
Amortization of acquired intangible assets			7,688			7,346			29,396			28,713
Acquisition-related and other transactional charges included in general and administrative costs			166			552			15,010			8,616
Restructuring and other charges, net			1,627			378			2,211			32,716
Non-operating charges (credits) ⁽²⁾			(68,829)			-			(68,829)			18,451
Income tax adjustments ⁽³⁾			(154,546)			(18,295)			(191,611)			(63,283)
Non-GAAP net income		$	130,567		$	91,787		$	470,158		$	298,448

GAAP diluted earnings per share		$	2.46		$	0.46		$	4.03		$	1.12
Stock-based compensation			0.36			0.35			1.50			0.99
Amortization of acquired intangibles			0.13			0.12			0.50			0.48
Acquisition-related and other transactional charges			-			-			0.13			0.07
Restructuring and other charges, net			0.01			-			0.02			0.28
Non-operating charges (credits)			(0.58)			-			(0.58)			0.16
Income tax adjustments			(1.30)			(0.16)			(1.62)			(0.54)
Non-GAAP diluted earnings per share		$	1.10		$	0.78		$	3.97		$	2.57

(1) Operating margin impact of non-GAAP adjustments:
		Three Months Ended						Twelve Months Ended
		September 30,			September 30,			September 30,			September 30,
		2021			2020			2021			2020
	GAAP operating margin		24.0	%		17.1	%		21.1	%		14.5	%
	Stock-based compensation		9.0	%		10.6	%		9.8	%		7.9	%
	Amortization of acquired intangibles		3.3	%		3.6	%		3.3	%		3.8	%
	Acquisition-related and other transactional charges		0.0	%		0.1	%		0.8	%		0.6	%
	Restructuring and other charges, net		0.3	%		0.1	%		0.1	%		2.2	%
	Non-GAAP operating margin		36.6	%		31.6	%		35.1	%		29.0	%

(2)

In the fourth quarter of 2021, we recorded a $69 million gain on our investment in Matterport, Inc. In fiscal 2020, we recognized $15 million of expense related to penalties for the early redemption of the 6.000% Senior Notes due in 2024 and wrote off approximately $3 million of related debt issuance costs.

(3)

In the three months ended September 30, 2021 our GAAP results included a benefit of $137.4 million related to the release of the valuation allowance on the majority of our U.S. net deferred tax assets. In the twelve months ended September 30, 2021 and September 30, 2020 our GAAP results included benefits of $179.7 million and $21.2 million, respectively. These results include the benefits of $42.3 million and $21.2 million, respectively, related to the release of a valuation allowance as a result of the Arena and Onshape acquisitions. As the non-GAAP tax provision is calculated assuming that there is no valuation allowance, these benefits have been excluded. Income tax adjustments reflect the tax effects of non-GAAP adjustments which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments listed above. Additionally, our non-GAAP results for the twelve months of FY'21 exclude tax expense of $34.8 million related to a non-U.S. prior period tax exposure, primarily related to foreign withholding taxes.




PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)


	September 30,		September 30,
	2021		2020

ASSETS

Cash and cash equivalents	$	326,532	$	275,458
Marketable securities		-		59,099
Accounts receivable, net		541,072		415,221
Property and equipment, net		100,237		101,499
Goodwill and acquired intangible assets, net		2,570,854		1,863,356
Lease assets, net		152,337		149,933
Other assets		826,037		518,172

Total assets	$	4,517,069	$	3,382,738

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue	$	497,677	$	426,465
Debt, net of deferred issuance costs		1,439,471		1,005,314
Lease obligations		208,799		215,023
Other liabilities		332,654		297,688
Stockholders' equity		2,038,468		1,438,248

Total liabilities and stockholders' equity	$	4,517,069	$	3,382,738




PTC Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)



	Three Months Ended				Twelve Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020

Cash flows from operating activities:
Net income	$	292,943	$	53,406	$	476,923	$	130,695
Stock-based compensation		43,393		41,544		177,289		115,149
Depreciation and amortization		22,569		20,140		85,239		80,817
Amortization of right-of-use lease assets		9,264		9,220		37,295		38,687
Gain on investment		(68,829)		-		(68,829)		-
Accounts receivable		(115,308)		(87,027)		(119,418)		(32,365)
Accounts payable and accruals		25,916		14		41,871		5,147
Deferred revenue		27,969		13,689		58,702		17,046
Income taxes		(130,602)		(6,812)		(144,126)		(51,257)
Other		(61,994)		(10,200)		(176,137)		(70,111)
Net cash provided by operating activities		45,321		33,974		368,809		233,808

Capital expenditures		(13,051)		(4,784)		(24,713)		(20,196)
Acquisition of businesses, net of cash acquired ⁽¹⁾		(251)		(14,958)		(718,030)		(483,478)
Purchase of intangible assets		-		-		(550)		(11,050)
Purchase of investment		(2,000)		-		(4,000)		-
Borrowings (payments) on debt, net		(40,000)		(120,000)		432,000		344,875
Repurchases of common stock		(30,000)		-		(30,000)		-
Net proceeds associated with issuance of common stock		11,091		9,402		21,575		18,382
Payments of withholding taxes in connection with vesting of stock-based awards		(10,742)		(508)		(52,957)		(33,740)
Debt issuance costs		-		(24)		-		(17,107)
Debt early redemption premium		-		-		-		(15,000)
Net proceeds from (purchases of) marketable securities ⁽²⁾		-		(1,532)		58,469		(1,827)
Other financing & investing activities		2,181		(7,692)		611		(9,421)
Foreign exchange impact on cash		(1,773)		4,152		(127)		25

Net change in cash, cash equivalents, and restricted cash		(39,224)		(101,970)		51,087		5,271
Cash, cash equivalents, and restricted cash, beginning of period		366,271		377,930		275,960		270,689
Cash, cash equivalents, and restricted cash, end of period	$	327,047	$	275,960	$	327,047	$	275,960


	Three Months Ended				Twelve Months Ended
	September 30,		September 30,		September 30,		September 30,
	2021		2020		2021		2020
Cash provided by operating activities ⁽³⁾	$	45,321	$	33,974	$	368,809	$	233,808
Capital expenditures		(13,051)		(4,784)		(24,713)		(20,196)
Free cash flow ⁽³⁾	$	32,270	$	29,190	$	344,096	$	213,612

(1)	In the second quarter of 2021, we acquired Arena for approximately $715 million, net of cash acquired. In the first quarter of 2020, we acquired Onshape for $469 million, net of cash acquired.
(2)	In the first quarter of 2021, we sold all of our available-for-sale securities.
(3)	Operating and free cash flow includes $0.8 million and $14.5 million of restructuring payments in the three and twelve months ended September 30, 2021, respectively, compared with $7.2 million and $42.0 million in the three and twelve months ended September 30, 2020. Operating and free cash flow includes $0.1 million and $15.0 million of acquisition-related payments for the three and twelve months ended September 30, 2021, respectively, compared with $0.8 million and $9.6 million in the three and twelve months ended September 30, 2020. Operating and free cash flow includes $17.9 million in un-forecasted payments related to the prior period tax exposure from a non-U.S. tax dispute in the twelve months ended September 30, 2021.

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