PTC Q1 Earnings Surpass Estimates, Revenues Increase Y/Y

PTC PTC reported first-quarter fiscal 2019 earnings of 56 cents per share (per ASC 606 adopted on Oct 1, 2018) that beat the Zacks Consensus Estimate by 15 cents. Earnings (per ASC 605) were 57 cents, up 83.9% year over year.

 

Revenues on a non-GAAP basis (per ASC 606) were almost $335 million. Further, revenues on a non-GAAP basis (per ASC 605) increased 10.4% year over year to $339 million.

 

Revenue Details

 

License and subscription bookings were $101 million, in line with the year-ago quarter’s figure on a constant currency (cc) basis. Management observed continued strength across the product portfolio, with notable strength in CAD. Channel and Direct deals below $1 million, grew mid-teens year over year.

 

Notably, large competitive customer wins include BMW and Huawei in the quarter. While APAC grew double digits, Americas and EMEA bookings were negatively impacted by 9 large deals ($20 million in bookings) that were not closed in the first quarter.

 

Subscription annualized contract value (ACV) was $29 million, down 13% at cc and accounted for 58% of bookings.

 

Software revenues increased 12.9% year over year or 15% at cc to $299 million. Recurring software revenues increased 11% year over year or 13% at cc to $258 million.

 

PTC Inc. Price, Consensus and EPS Surprise

PTC Inc. Price, Consensus and EPS Surprise | PTC Inc. Quote

 

IoT software revenues were $34 million, up 30% year over year or 31% at cc. Growth was driven by 35% increase at cc in recurring IoT software revenues.

 

Annualized recurring revenues (ARR) were $1.045 billion, up 13% year over year. Billed deferred revenues increased 15% year over year to $496 million. Total deferred revenues — billed and unbilled — increased 16% year over year.

 

Operating Details

 

Gross margin on a non-GAAP basis (as per ASC 605) expanded 460 basis points (bps) on a year-over-year basis to 80.7%. Gross margin on a non-GAAP basis (as per ASC 606) was 79.8%.

 

GAAP operating expenses increased 11.7% year over year to $230.4 million, due to higher sales & marketing, and general & administrative expenses, which increased 8% and 8.1%, respectively.  Research & development (R&D) expenses decreased 5% from the year-ago quarter.

 

Operating profit on a non-GAAP basis (as per ASC 605) jumped 86.8% year over year to $94.3 million. Operating margin on a non-GAAP basis (as per ASC 606) was 27.2%.

 

Balance Sheet & Cash Flow

 

As of Dec 29, 2018, total cash, cash equivalents and marketable securities were $333 million and total debt, net of deferred issuance costs, was $778 million.

 

Gross borrowings totaled $783 million, including $500 million of senior notes and $283 million outstanding under PTC’s revolving credit facility.

 

Guidance — Including ASC 606

 

For second-quarter fiscal 2019, revenues are projected between $283 million and $298 million. Recurring revenues are expected to be $235-$247 million. Total software revenues are expected between $244 million and $257 million.

 

Subscription annualized contract value (ACV) is expected to be $50-$55 million. License and Subscription Bookings are projected between $107 million and $120 million.

 

Operating expenses on a non-GAAP basis are expected between $178 million and $179 million. Operating margin is expected to be 12-17%.

 

Moreover, earnings are expected between 15 cents and 27 cents per share.

 

For fiscal 2019, revenues are projected between $1.245 billion and $1.295 billion. Recurring revenues are expected to be $1.013-$1.055 billion. Total software revenues (as per 606) are expected between $1.075 billion and $1.125 billion.

 

Subscription ACV is expected to be $216-$224 million. License and Subscription Bookings are projected between $500 million and $520 million.

 

Operating expenses on a non-GAAP basis are expected between $724 million and $728 million. Operating margin is expected to be 19-22%.

 

Further, earnings are expected between $1.35 and $1.70 per share. Adjusted free cash flow is projected to be $290-$300 million.

 

Guidance — Including ASC 605

 

For second-quarter fiscal 2019, revenues are projected between $310 million and $315 million. Total software revenues are expected between $271 million and $276 million.

 

Operating expenses on a non-GAAP basis are expected between $179 million and $182 million. Operating margin is expected to be 19-20%.

 

Moreover, earnings are expected between 31 cents and 36 cents per share.

 

For fiscal 2019, revenues are projected between $1.325 billion and $1.340 billion. Total software revenues are expected between $1.167 billion and $1.180 billion.

 

Operating expenses on a non-GAAP basis are expected between $748 million and $753 million. Operating margin is expected to be 23%.

 

Moreover, earnings are expected between $1.75 and $1.85 per share.

 

Zacks Rank & Stocks to Consider

 

PTC currently carries a Zacks Rank #3 (Hold).

 

Synopsis SNPS, Microsoft MSFT and ANSYS ANSS are better-ranked stocks in the same industry. While Synopsis sports a Zacks Rank #1 (Strong Buy), both Microsoft and ANSYS carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

 

While Microsoft is set to report on Jan 30, both Synopsis and ANSYS are expected to report on Feb 20.

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