PTC Announces Fiscal Fourth Quarter 2019 Results; Provides Fiscal 2020 Outlook

Solid Q4’19 Revenue and Operating Margin Performance

BOSTON–(BUSINESS WIRE)–PTC (NASDAQ: PTC) today reported financial results for its fiscal fourth quarter and fiscal year ended September 30, 2019.

James Heppelmann, President and CEO said “PTC’s ARR grew 12% in fiscal 2019 reflecting the strength of our technology in the markets we serve and the value we provide to our customers. We also successfully completed the transition to subscription licensing and ended the year strong across key financial metrics including revenue and margins.”

Heppelmann added, “Today, we also announced PTC’s intention to acquire Onshape, creators of the first SaaS product development platform that unites next-generation CAD, data management, and collaboration tools. Onshape’s proven talent and technology are the perfect complement to PTC’s market leading on-premise CAD and PLM solutions, and will dramatically strengthen PTC’s ability to participate in the highest growth part of the market with a unique SaaS-based product offering. Most importantly, Onshape will put PTC in a position to lead the market’s inevitable shift to SaaS.”

Fourth quarter and fiscal year 2019 highlights1

Additional 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 [email protected]. Note that all references to revenue and margins are under ASC 605.

  • License and subscription bookings in Q4’19 were $150 million, $5 million above the high end of our guidance range driven by strong bookings in IoT and AR, including a mega deal with our strategic alliance partner Rockwell Automation.2 FY’19 license and subscription bookings were $472 million, up 1% year over year or 4% on a constant currency basis.
  • ARR per the new definition was $1,116 million, or $1,134 million at the guidance Fx rate, at the end of Q4’19, in line with the targets we provided in September. This is a 10% increase, or 12% increase consistent with the guidance rate, compared to Q4’18, reflecting the strength of our recurring revenue business.
  • Operating cash flow was $55 million in Q4’19; FY’19 operating cash flow was $285 million. FY’19 free cash flow was $221 million and adjusted free cash flow was $245 million, increases of 4% and 13%, respectively, over Q4’18. FY’19 adjusted free cash flow excludes $25 million of restructuring payments related to our workforce realignment and headquarters relocation.
  • Recurring software revenue was $284 million in Q4’19, an increase of 9% year over year or 11% in constant currency. FY’19 recurring software revenue was $1,079 million, an increase of 10% year over year or 13% in constant currency.
  • Operating margin: Q4’19 GAAP operating margin was 11%, compared to 4% in Q4’18; Q4’19 non-GAAP operating margin was 22%, compared to 21% in Q4’18. FY’19 GAAP operating margin was 8%, compared to 6% in FY’18; FY’19 non-GAAP operating margin was 22%, compared to 18% in FY’18.
  • Total cash, cash equivalents, and marketable securities: As of the end of Q4’19 total cash, cash equivalents, and marketable securities was $327 million and total debt, net of deferred issuance costs, was $669 million3. We repurchased approximately 378,000 shares in the fourth quarter of fiscal 2019 and 1.4 million shares in fiscal 2019, spending $25 million and $115 million, respectively. Additionally, in Q4’19, we repaid $30 million on our revolving credit facility. In Q3 of fiscal 2019, we also retired 3 million shares at no cost related to the ASR initiated in the fourth quarter of fiscal 2018.

Fiscal 2020 Operational Outlook

Our fiscal 2020 operational outlook includes the following general considerations:

  • ARR guidance:

    • Allows for potential impact of moderate weakening of macroeconomic conditions
    • Onshape contribution of approximately 100 bps of incremental growth
    • Contribution from ramp deals and deals with FY’20 start dates
    • Modest improvement to churn
  • FCF and adjusted FCF guidance reflects:

    • Operating cash flow of $248M – $268M
    • $30M of Capex
    • $37M of restructuring and headquarters relocation charges4
    • Short-term impacts of $65M including:

      • $25M of incremental interest expense related to the Onshape acquisition
      • $25M of higher cash taxes driven by the timing of ASC 606 revenue recognition
      • $15M of negative impact due to Fx

 

 

In millions

Operating Metrics

ARR

$1,245 – $1,280

YoY in CC

12% – 15%

Free cash flow

$218-$238

YoY in CC

(1%) – 8%

Adjusted free cash flow

$255-$275

YoY in CC

4% – 12%

Fiscal 2020 Financial Outlook

Our fiscal 2020 financial outlook includes the following general considerations:

  • The Onshape acquisition (excluding the impact of purchase accounting and acquisition-related costs).
  • Operating expenses are expected to grow roughly 9%, slightly elevated due to the Onshape acquisition. We expect the run-rate to decline in the back half of FY’20.
  • Allows for potential impact of moderate weakening of macroeconomic conditions
  • Based on Fx rates as of September 30, 2019.
  • Sharecount will be roughly flat compared to FY’19. We are suspending the share repurchase program for one year to accelerate debt repayment.
  • ASC 606 creates quarterly and annual volatility for on-premise subscription companies due to factors that affect revenue recognition such as:

    • Term length for new and renewal bookings
    • Contract start-date timing
    • Quarterly spread of new and renewal bookings
    • Support to subscription conversions
    • Potential future changes to revenue recognition for certain products as they become further cloud enabled
  • As such, we are providing a wide range on revenue and EPS.


    1We include operating and non-GAAP financial measures in our operational highlights. We revised the definition of ARR on September 5, 2019. 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.

    2The mega deal from Rockwell Automation was issued to satisfy a portion of expected FY20 demand and will be credited against committed ACV minimums due in FY20 under the parties’ strategic alliance agreement, as amended. Excluding the mega deal, bookings for the quarter were within the guidance range.

    3 We plan to increase the revolving credit facility from $700 million to $1 billion in FY’20.

    4 Adjusted free cash flow excludes $37 million of estimated restructuring payments related primarily to our workforce realignment associated with expected synergies and operational efficiencies related to the Onshape acquisition, and headquarters relocation.

For fiscal year ending September 30, 2020, the company expects:

 

 

 

In millions except per share amounts

 

GAAP

Non-GAAP(1)

Revenue

 

$1,410-$1,510

$1,410-$1,510

Effective tax rate

 

20%

19%

Diluted shares outstanding

 

116

116

Diluted earnings per share

 

$0.59-$1.22

$1.95-$2.60

(1) The FY’20 non-GAAP revenue and non-GAAP EPS guidance exclude the estimated items outlined in the table below, as well as any tax effects and discrete tax items (which are not known nor reflected).

 

In millions

 

 

FY’20

 

 

 

 

Restructuring charges

 

 

$25

Intangible asset amortization expense

 

 

$49

Stock-based compensation expense

 

 

$119

Total Estimated Pre-Tax GAAP adjustments

 

 

$193

Estimates for the effect of acquisition accounting on fair value of acquired deferred revenue, intangible amortization and acquisition-related charges related primarily to the Onshape acquisition are not reflected in the FY’20 revenue and EPS guidance table above.

PTC’s Fiscal Fourth Quarter Results Conference Call, Prepared Remarks and Data Tables

Prepared remarks and financial data tables have been posted to the Investor Relations section of our website at ptc.com. The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, October 23, 2019. To access the live webcast, please visit PTC’s Investor Relations website at investor.ptc.com at least 15 minutes before the scheduled start time to download any necessary audio or plug-in software. To participate in the live conference call, dial 773-799-3757 or 800-857-5592 and provide the passcode PTC. The call will be recorded, and a replay will be available for 10 days following the call by dialing 800-873-2012 and entering the passcode 9752. The archived webcast will also be available on PTC’s Investor Relations website.

 
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 
 
Three Months Ended
September 30, September 30, September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606 ASC 605 ASC 605
 
Revenue:
Subscription license

$

84,936

 

Subscription support & cloud services

 

97,641

 

Total Subscription

 

182,577

 

$

185,483

 

$

142,376

 

Perpetual support

 

100,007

 

 

98,577

 

 

117,819

 

Total recurring revenue

 

282,584

 

 

284,060

 

 

260,195

 

Perpetual license

 

9,347

 

 

8,530

 

 

27,030

 

Total software revenue

 

291,931

 

 

292,590

 

 

287,225

 

Professional services

 

43,073

 

 

42,238

 

 

25,296

 

Total revenue (1)

 

335,004

 

 

334,828

 

 

312,521

 

 
Cost of revenue: (2) (3)
Cost of software revenue

 

48,813

 

 

48,415

 

 

43,765

 

Cost of professional services revenue

 

36,604

 

 

35,343

 

 

34,361

 

Total cost of revenue

 

85,417

 

 

83,758

 

 

78,126

 

 
Gross margin

 

249,587

 

 

251,070

 

 

234,395

 

 
Operating expenses: (2)(3)
Sales and marketing

 

101,307

 

 

111,701

 

 

109,198

 

Research and development

 

64,113

 

 

64,113

 

 

62,396

 

General and administrative

 

25,911

 

 

25,911

 

 

41,558

 

Amortization of acquired intangible assets

 

6,055

 

 

6,055

 

 

7,784

 

Restructuring and other charges, net

 

5,650

 

 

5,650

 

 

1,918

 

Total operating expenses

 

203,036

 

 

213,430

 

 

222,854

 

 
Operating income

 

46,551

 

 

37,640

 

 

11,541

 

Other expense, net (3)

 

(12,767

)

 

(12,790

)

 

(10,872

)

Income before income taxes

 

33,784

 

 

24,850

 

 

669

 

Provision (benefit) for income taxes (4)

 

23,958

 

 

40,794

 

 

(12,522

)

Net income (loss)

$

9,826

 

$

(15,944

)

$

13,191

 

 
Earnings (loss) per share:
Basic

$

0.09

 

$

(0.14

)

$

0.11

 

Weighted average shares outstanding

 

115,025

 

 

115,025

 

 

117,823

 

 
Diluted

$

0.08

 

$

(0.14

)

$

0.11

 

Weighted average shares outstanding

 

115,897

 

 

115,025

 

 

119,580

 

 
 

(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.

(3

)

Periods prior to 2019 reflect immaterial expense reclassifications in connection with the adoption of new pension accounting prescribed in Accounting Standards Update 2017-07.

(4

)

Our tax provision for the fourth quarter of 2019 is based on estimates that are subject to final review.
 
PTC Inc.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
 
 
Twelve Months Ended
September 30, September 30, September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606 ASC 605 ASC 605
 
Revenue:
Subscription license

$

253,698

 

Subscription support & cloud services

 

348,452

 

Total Subscription

 

602,150

 

$

667,597

 

$

482,027

 

Perpetual support

 

415,248

 

 

411,030

 

 

496,826

 

Total recurring revenue

 

1,017,398

 

 

1,078,627

 

 

978,853

 

Perpetual license

 

70,702

 

 

72,191

 

 

109,634

 

Total software revenue

 

1,088,100

 

 

1,150,818

 

 

1,088,487

 

Professional services

 

167,531

 

 

160,676

 

 

153,337

 

Total revenue (1)

 

1,255,631

 

 

1,311,494

 

 

1,241,824

 

 
Cost of revenue: (2)(3)
Cost of software revenue

 

185,414

 

 

183,218

 

 

182,843

 

Cost of professional services revenue

 

139,964

 

 

134,936

 

 

143,659

 

Total cost of revenue

 

325,378

 

 

318,154

 

 

326,502

 

 
Gross margin

 

930,253

 

 

993,340

 

 

915,322

 

 
Operating expenses: (2)(3)
Sales and marketing

 

417,449

 

 

441,958

 

 

414,764

 

Research and development

 

246,888

 

 

246,888

 

 

249,786

 

General and administrative

 

127,919

 

 

127,919

 

 

143,045

 

Amortization of acquired intangible assets

 

23,841

 

 

23,841

 

 

31,350

 

Restructuring and other charges, net

 

51,114

 

 

51,114

 

 

3,764

 

Total operating expenses

 

867,211

 

 

891,720

 

 

842,709

 

 
Operating income

 

63,042

 

 

101,620

 

 

72,613

 

Other expense, net (3)

 

(42,742

)

 

(42,916

)

 

(43,957

)

Income before income taxes

 

20,300

 

 

58,704

 

 

28,656

 

Provision (benefit) for income taxes (4)

 

47,760

 

 

55,725

 

 

(23,331

)

Net income (loss)

$

(27,460

)

$

2,979

 

$

51,987

 

 
Earnings (loss) per share:
Basic

$

(0.23

)

$

0.03

 

$

0.45

 

Weighted average shares outstanding

 

117,724

 

 

117,724

 

 

116,390

 

 
Diluted

$

(0.23

)

$

0.03

 

$

0.44

 

Weighted average shares outstanding

 

117,724

 

 

118,714

 

 

118,158

 

 
 

(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.

(3

)

Periods prior to 2019 reflect immaterial expense reclassifications in connection with the adoption of new pension accounting prescribed in Accounting Standards Update 2017-07.

(4

)

Our tax provision for fiscal 2019 is based on estimates that are subject to final review. Our 2018 year-to-date tax rate includes a benefit of $12 million relating to the enactment of the Tax Cuts and Jobs Act.
 
PTC Inc.
SUPPLEMENTAL FINANCIAL DATA FOR REVENUE AND STOCK-BASED COMPENSATION
(in thousands)
 
 
Revenue by license, support and services is as follows:
Three Months Ended
September 30, September 30, September 30,

2019

2019

2018

ASC 606 ASC 605 ASC 605
License revenue (1)

$

94,283

$

173,514

$

152,675

Support and cloud services revenue

 

197,648

 

119,076

 

134,550

Professional services revenue

 

43,073

 

42,238

 

25,296

Total revenue

$

335,004

$

334,828

$

312,521

 
Twelve Months Ended
September 30, September 30, September 30,

2019

2019

2018

ASC 606 ASC 605 ASC 605
License revenue (1)

$

324,400

$

666,770

$

529,265

Support and cloud services revenue

 

763,700

 

484,048

 

559,222

Professional services revenue

 

167,531

 

160,676

 

153,337

Total revenue

$

1,255,631

$

1,311,494

$

1,241,824

 
(1) Under ASC 605, we have classified all subscription revenue as license revenue.
 
The amounts in the income statement include stock-based compensation as follows:
 
Three Months Ended
September 30, September 30, September 30,

2019

2019

2018

ASC 606 ASC 605 ASC 605
Cost of software revenue

$

1,791

$

1,791

$

1,180

Cost of professional services revenue

 

1,361

 

1,361

 

2,233

Sales and marketing

 

6,912

 

6,912

 

10,066

Research and development

 

7,168

 

7,168

 

3,862

General and administrative

 

(2,440)

 

(2,440)

 

13,583

Total stock-based compensation

$

14,792

$

14,792

$

30,924

 
Twelve Months Ended
September 30, September 30, September 30,

 

2019

 

2019

 

2018

ASC 606 ASC 605 ASC 605
Cost of software revenue

$

5,513

$

5,513

$

4,446

Cost of professional services revenue

 

6,426

 

6,426

 

7,079

Sales and marketing

 

32,026

 

32,026

 

24,893

Research and development

 

22,019

 

22,019

 

13,488

General and administrative

 

20,416

 

20,416

 

33,033

Total stock-based compensation

$

86,400

$

86,400

$

82,939

 
 
PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
 
Three Months Ended
September 30, September 30, September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606 ASC 605 ASC 605
 
GAAP revenue

$

335,004

 

$

334,828

 

$

312,521

 

Fair value adjustment of acquired deferred subscription revenue

 

 

 

 

 

75

 

Fair value adjustment of acquired deferred services revenue

 

192

 

 

192

 

 

223

 

Settlement adjustment – subscription revenue (2)

 

 

 

 

 

(5,250

)

Settlement adjustment – services revenue (2)

 

 

 

 

 

14,546

 

Non-GAAP revenue

$

335,196

 

$

335,020

 

$

322,115

 

 
GAAP gross margin

$

249,587

 

$

251,070

 

$

234,395

 

Fair value adjustment of acquired deferred revenue

 

192

 

 

192

 

 

298

 

Settlement adjustment – revenue (2)

 

 

 

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(88

)

 

(88

)

 

(91

)

Stock-based compensation

 

3,152

 

 

3,152

 

 

3,413

 

Amortization of acquired intangible assets included in cost of revenue

 

6,874

 

 

6,874

 

 

6,677

 

Non-GAAP gross margin

$

259,717

 

$

261,200

 

$

253,988

 

 
GAAP operating income

$

46,551

 

$

37,640

 

$

11,541

 

Fair value adjustment of acquired deferred revenue

 

192

 

 

192

 

 

298

 

Settlement adjustment – revenue (2)

 

 

 

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(88

)

 

(88

)

 

(91

)

Stock-based compensation

 

14,792

 

 

14,792

 

 

30,924

 

Amortization of acquired intangible assets included in cost of revenue

 

6,874

 

 

6,874

 

 

6,677

 

Amortization of acquired intangible assets

 

6,055

 

 

6,055

 

 

7,784

 

Acquisition-related and other transactional charges included in general and administrative costs

 

1,895

 

 

1,895

 

 

135

 

Restructuring and other charges, net

 

5,650

 

 

5,650

 

 

1,918

 

Non-GAAP operating income (1)

$

81,921

 

$

73,010

 

$

68,482

 

 
GAAP net income (loss)

$

9,826

 

$

(15,944

)

$

13,191

 

Fair value adjustment of acquired deferred revenue

 

192

 

 

192

 

 

298

 

Settlement adjustment – revenue (2)

 

 

 

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(88

)

 

(88

)

 

(91

)

Stock-based compensation

 

14,792

 

 

14,792

 

 

30,924

 

Amortization of acquired intangible assets included in cost of revenue

 

6,874

 

 

6,874

 

 

6,677

 

Amortization of acquired intangible assets

 

6,055

 

 

6,055

 

 

7,784

 

Acquisition-related and other transactional charges included in general and administrative costs

 

1,895

 

 

1,895

 

 

135

 

Restructuring and other charges, net

 

5,650

 

 

5,650

 

 

1,918

 

Income tax adjustments (3)

 

29,317

 

 

32,673

 

 

(16,843

)

Non-GAAP net income

$

74,513

 

$

52,099

 

$

53,289

 

 
GAAP diluted earnings (loss) per share

$

0.08

 

$

(0.14

)

$

0.11

 

Fair value adjustment of acquired deferred revenue

 

 

 

 

 

 

Settlement adjustment – revenue (2)

 

 

 

 

 

0.08

 

Stock-based compensation

 

0.13

 

 

0.13

 

 

0.26

 

Amortization of acquired intangibles

 

0.11

 

 

0.11

 

 

0.12

 

Acquisition-related and other transactional charges

 

0.02

 

 

0.02

 

 

 

Restructuring and other charges, net

 

0.05

 

 

0.05

 

 

0.02

 

Income tax adjustments

 

0.25

 

 

0.28

 

 

(0.14

)

Non-GAAP diluted earnings per share

$

0.64

 

$

0.45

 

$

0.45

 

 
GAAP diluted weighted average shares outstanding

 

115,897

 

 

115,025

 

 

119,580

 

Dilutive effect of stock-based compensation plans

 

 

 

872

 

 

 

Non-GAAP diluted weighted average shares outstanding

 

115,897

 

 

115,897

 

 

119,580

 

 

(1

)

Operating margin impact of non-GAAP adjustments:
Three Months Ended
September 30, September 30, September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606 ASC 605 ASC 605
GAAP operating margin

 

13.9

%

 

11.2

%

 

3.7

%

Fair value adjustment of acquired deferred revenue

 

0.1

%

 

0.1

%

 

0.1

%

Settlement adjustment – revenue (2)

 

0.0

%

 

0.0

%

 

2.4

%

Fair value adjustment to deferred services cost

 

0.0

%

 

0.0

%

 

0.0

%

Stock-based compensation

 

4.4

%

 

4.4

%

 

9.9

%

Amortization of acquired intangibles

 

3.9

%

 

3.9

%

 

4.6

%

Acquisition-related and other transactional charges

 

0.6

%

 

0.6

%

 

0.0

%

Restructuring and other charges, net

 

1.7

%

 

1.7

%

 

0.6

%

Non-GAAP operating margin

 

24.4

%

 

21.8

%

 

21.3

%

 

(2

)

Our Q4’18 and FY’18 GAAP revenue results include the impact of a settlement of a customer dispute concerning a professional services receivable. The settlement, reached in September 2018, included partial payment of the receivable and new software purchases. The net revenue write-down recorded in the fourth quarter of 2018 was $9.3 million, comprised of a $14.5 million services revenue write-down, partially offset by new subscription revenue of $5.2 million. We have excluded these amounts from our Non-GAAP results.

(3

)

We have recorded a full valuation allowance against our U.S. net deferred tax assets. As we are profitable on a non-GAAP basis, the 2019 and 2018 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. 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. The fourth quarter of 2018 excludes the GAAP benefit of a $3 million valuation allowance release in a foreign jurisdiction as the jurisdiction was profitable on a non-GAAP basis.
PTC Inc.
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
 
Twelve Months Ended
September 30, September 30, September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606 ASC 605 ASC 605
 
GAAP revenue

$

1,255,631

 

$

1,311,494

 

$

1,241,824

 

Fair value adjustment of acquired deferred subscription revenue

 

66

 

 

66

 

 

341

 

Fair value adjustment of acquired deferred services revenue

 

721

 

 

721

 

 

929

 

Settlement adjustment – subscription revenue (2)

 

 

 

 

 

(5,250

)

Settlement adjustment – services revenue (2)

 

 

 

 

 

14,546

 

Non-GAAP revenue

$

1,256,418

 

$

1,312,281

 

$

1,252,390

 

 
GAAP gross margin

$

930,253

 

$

993,340

 

$

915,322

 

Fair value adjustment of acquired deferred revenue

 

787

 

 

787

 

 

1,270

 

Settlement adjustment – revenue (2)

 

 

 

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(308

)

 

(308

)

 

(384

)

Stock-based compensation

 

11,939

 

 

11,939

 

 

11,525

 

Amortization of acquired intangible assets included in cost of revenue

 

27,306

 

 

27,306

 

 

26,706

 

Non-GAAP gross margin

$

969,977

 

$

1,033,064

 

$

963,735

 

 
GAAP operating income

$

63,042

 

$

101,620

 

$

72,613

 

Fair value adjustment of acquired deferred revenue

 

787

 

 

787

 

 

1,270

 

Settlement adjustment – revenue (2)

 

 

 

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(308

)

 

(308

)

 

(384

)

Stock-based compensation

 

86,400

 

 

86,400

 

 

82,939

 

Amortization of acquired intangible assets included in cost of revenue

 

27,306

 

 

27,306

 

 

26,706

 

Amortization of acquired intangible assets

 

23,841

 

 

23,841

 

 

31,350

 

Acquisition-related and other transactional charges included in general and administrative costs

 

3,110

 

 

3,110

 

 

1,853

 

Restructuring and other charges, net

 

51,114

 

 

51,114

 

 

3,764

 

Non-GAAP operating income (1)

$

255,292

 

$

293,870

 

$

229,407

 

 
GAAP net income (loss)

$

(27,460

)

$

2,979

 

$

51,987

 

Fair value adjustment of acquired deferred revenue

 

787

 

 

787

 

 

1,270

 

Settlement adjustment – revenue (2)

 

 

 

 

 

9,296

 

Fair value adjustment to deferred services cost

 

(308

)

 

(308

)

 

(384

)

Stock-based compensation

 

86,400

 

 

86,400

 

 

82,939

 

Amortization of acquired intangible assets included in cost of revenue

 

27,306

 

 

27,306

 

 

26,706

 

Amortization of acquired intangible assets

 

23,841

 

 

23,841

 

 

31,350

 

Acquisition-related and other transactional charges included in general and administrative costs

 

3,110

 

 

3,110

 

 

1,853

 

Restructuring and other charges, net

 

51,114

 

 

51,114

 

 

3,764

 

Income tax adjustments (3)

 

29,719

 

 

11,816

 

 

(37,581

)

Non-GAAP net income

$

194,509

 

$

207,045

 

$

171,200

 

 
GAAP diluted earnings (loss) per share

$

(0.23

)

$

0.03

 

$

0.44

 

Fair value adjustment of acquired deferred revenue

 

0.01

 

 

0.01

 

 

0.01

 

Settlement adjustment – revenue (2)

 

 

 

 

 

0.08

 

Stock-based compensation

 

0.73

 

 

0.73

 

 

0.70

 

Amortization of acquired intangibles

 

0.43

 

 

0.43

 

 

0.49

 

Acquisition-related and other transactional charges

 

0.03

 

 

0.03

 

 

0.02

 

Restructuring and other charges, net

 

0.43

 

 

0.43

 

 

0.03

 

Income tax adjustments

 

0.25

 

 

0.10

 

 

(0.32

)

Non-GAAP diluted earnings per share

$

1.64

 

$

1.74

 

$

1.45

 

 
GAAP diluted weighted average shares outstanding

 

117,724

 

 

118,714

 

 

118,158

 

Dilutive effect of stock-based compensation plans

 

990

 

 

 

 

 

Non-GAAP diluted weighted average shares outstanding

 

118,714

 

 

118,714

 

 

118,158

 

 

(1

)

Operating margin impact of non-GAAP adjustments:
Twelve Months Ended
September 30, September 30, September 30,

 

2019

 

 

2019

 

 

2018

 

ASC 606 ASC 605 ASC 605
GAAP operating margin

 

5.0

%

 

7.7

%

 

5.8

%

Fair value adjustment of acquired deferred revenue

 

0.1

%

 

0.1

%

 

0.1

%

Settlement adjustment – revenue (2)

 

0.0

%

 

0.0

%

 

0.6

%

Fair value adjustment to deferred services cost

 

0.0

%

 

0.0

%

 

0.0

%

Stock-based compensation

 

6.9

%

 

6.6

%

 

6.7

%

Amortization of acquired intangibles

 

4.1

%

 

3.9

%

 

4.7

%

Acquisition-related and other transactional charges

 

0.2

%

 

0.2

%

 

0.1

%

Restructuring and other charges, net

 

4.1

%

 

3.9

%

 

0.3

%

Non-GAAP operating margin

 

20.3

%

 

22.4

%

 

18.3

%

 

(2

)

Our Q4’18 and FY’18 GAAP revenue results include the impact of a settlement of a customer dispute concerning a professional services receivable. The settlement, reached in September 2018, included partial payment of the receivable and new software purchases. The net revenue write-down recorded in the fourth quarter of 2018 was $9.3 million, comprised of a $14.5 million services revenue write-down, partially offset by new subscription revenue of $5.2 million. We have excluded these amounts from our Non-GAAP results.

(3

)

We have recorded a full valuation allowance against our U.S. net deferred tax assets. As we are profitable on a non-GAAP basis, the 2019 and 2018 non-GAAP tax provisions are being calculated assuming there is no valuation allowance. 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. The fourth quarter of 2018 excludes the GAAP benefit of a $3 million valuation allowance release in a foreign jurisdiction as the jurisdiction was profitable on a non-GAAP basis and a non-cash benefit of approximately $12 million related to the enactment of the Tax Cuts and Jobs Act.

Contacts

PTC Investor Relations Contacts
Tim Fox

[email protected]

Noelle Faris

[email protected]

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