PTC Announces Third Quarter FY’16 Results

PTC and the PTC logo are trademarks or registered trademarks of PTC Inc. or its subsidiaries in the United States and in other countries.

About PTC
PTC (NASDAQ: PTC) is a global provider of technology platforms and solutions that transform how companies create, operate, and service the “things” in the Internet of Things (IoT). The company’s next-generation ThingWorx® technology platform gives developers the tools they need to capture, analyze, and capitalize on the vast amounts of data being generated by smart, connected products and systems. The company’s field-proven solutions are deployed in more than 26,000 businesses worldwide to generate a product or service advantage. PTC’s award-winning CEO, considered an industry thought leader, co-authored the definitive guides to the impact of the IoT on business in the Harvard Business Review.


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


	Three Months Ended						Nine Months Ended
	July 2,			July 4,			July 2,			July 4,
	2016			2015			2016			2015

Revenue:
Subscription	$	31,822		$	17,155		$	77,657		$	47,143
Support		161,881			165,687			494,262			516,042
Total recurring software		193,703			182,842			571,919			563,185
Perpetual license		44,648			66,771			132,100			201,707
Total software		238,351			249,613			704,019			764,892
Professional services		50,301			53,500			148,277			177,782
Total revenue		288,652			303,113			852,296			942,674

Cost of revenue:
Cost of software revenue ⁽¹⁾		38,864			33,282			114,291			102,525
Cost of professional services revenue ⁽¹⁾		43,606			46,094			128,518			155,847
Total cost of revenue		82,470			79,376			242,809			258,372

Gross margin		206,182			223,737			609,487			684,302

Operating expenses:
Sales and marketing ⁽¹⁾		94,874			88,353			264,480			261,702
Research and development ⁽¹⁾		57,118			54,078			171,397			175,333
General and administrative ⁽¹⁾		35,485			46,201			107,968			113,725
Amortization of acquired intangible assets		8,294			9,105			25,040			27,691
Restructuring charges		2,815			4,393			44,541			42,625
Total operating expenses		198,586			202,130			613,426			621,076

Operating income (loss)		7,596			21,607			(3,939	)		63,226
Other expense, net		(8,300	)		(3,668	)		(19,880	)		(10,492	)
Income (loss) before income taxes		(704	)		17,939			(23,819	)		52,734
Provision (benefit) for income taxes		(3,777	)		504			2,173			(377	)
Net income (loss)	$	3,073		$	17,435		$	(25,992	)	$	53,111

Earnings (loss) per share:
Basic	$	0.03		$	0.15		$	(0.23	)	$	0.46
Weighted average shares outstanding		114,795			114,764			114,499			115,021

Diluted	$	0.03		$	0.15		$	(0.23	)	$	0.46
Weighted average shares outstanding		115,698			116,025			114,499			116,330



(1)The amounts in the tables above include stock-based compensation as follows:

	Three Months Ended						Nine Months Ended
	July 2,			July 4,			July 2,			July 4,
	2016			2015			2016			2015
Cost of software revenue	$	1,158		$	1,133		$	4,163		$	3,158
Cost of professional services revenue		1,342			1,317			4,072			4,510
Sales and marketing		3,195			4,075			11,254			10,821
Research and development		2,531			2,928			7,578			9,015
General and administrative		5,570			4,618			24,754			10,631
Total stock-based compensation	$	13,796		$	14,071		$	51,821		$	38,135


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

	Three Months Ended						Nine Months Ended
	July 2,			July 4,			July 2,			July 4,
	2016			2015			2016			2015

GAAP revenue	$	288,652		$	303,113		$	852,296		$	942,674
Fair value adjustment of acquired deferred subscription revenue		746			352			1,711			1,624
Fair value adjustment of acquired deferred support revenue		-			125			-			855
Fair value adjustment of acquired deferred services revenue		277			309			873			844
Non-GAAP revenue	$	289,675		$	303,899		$	854,880		$	945,997

GAAP gross margin	$	206,182		$	223,737		$	609,487		$	684,302
Fair value adjustment of acquired deferred revenue		1,023			786			2,584			3,323
Fair value adjustment to deferred services cost		(121	)		(135	)		(378	)		(392	)
Stock-based compensation		2,500			2,450			8,235			7,668
Amortization of acquired intangible assets included in cost of software revenue		6,383			4,957			18,235			14,438
Non-GAAP gross margin	$	215,967		$	231,795		$	638,163		$	709,339

GAAP operating income (loss)	$	7,596		$	21,607		$	(3,939	)	$	63,226
Fair value adjustment of acquired deferred revenue		1,023			786			2,584			3,323
Fair value adjustment to deferred services cost		(121	)		(135	)		(378	)		(392	)
Stock-based compensation		13,796			14,071			51,821			38,135
Amortization of acquired intangible assets included in cost of software revenue		6,383			4,957			18,235			14,438
Amortization of acquired intangible assets		8,294			9,105			25,040			27,691
Acquisition-related charges included in general and administrative costs		937			2,778			3,215			8,703
US pension plan termination-related costs		-			1,995			-			5,392
Legal settlement accrual		-			13,622			-			13,622
Restructuring charges		2,815			4,393			44,541			42,625
Non-GAAP operating income ⁽²⁾	$	40,723		$	73,179		$	141,119		$	216,763

GAAP net income (loss)	$	3,073		$	17,435		$	(25,992	)	$	53,111
Fair value adjustment of acquired deferred revenue		1,023			786			2,584			3,323
Fair value adjustment to deferred services cost		(121	)		(135	)		(378	)		(392	)
Stock-based compensation		13,796			14,071			51,821			38,135
Amortization of acquired intangible assets included in cost of software revenue		6,383			4,957			18,235			14,438
Amortization of acquired intangible assets		8,294			9,105			25,040			27,691
Acquisition-related charges included in general and administrative costs		937			2,778			3,215			8,703
US pension plan termination-related costs		-			1,995			-			5,392
Legal settlement accrual		-			13,622			-			13,622
Restructuring charges		2,815			4,393			44,541			42,625
Non-operating credit facility refinancing costs		-			-			2,359			-
Income tax adjustments ⁽³⁾		(6,202	)		(7,309	)		(6,481	)		(24,551	)
Non-GAAP net income	$	29,998		$	61,698		$	114,944		$	182,097

GAAP diluted earnings (loss) per share	$	0.03		$	0.15		$	(0.23	)	$	0.46
Fair value of acquired deferred revenue		0.01			0.01			0.02			0.03
Stock-based compensation		0.12			0.12			0.45			0.33
Amortization of acquired intangibles		0.13			0.12			0.38			0.36
Acquisition-related charges		0.01			0.02			0.03			0.07
US pension plan termination-related costs		-			0.02			-			0.05
Legal settlement accrual		-			0.12			-			0.12
Restructuring charges		0.02			0.04			0.39			0.37
Non-operating credit facility refinancing costs		-			-			0.02			-
Income tax adjustments		(0.05	)		(0.06	)		(0.06	)		(0.21	)
Non-GAAP diluted earnings per share	$	0.26		$	0.53		$	1.00		$	1.57

GAAP diluted weighted average shares outstanding		115,698			116,025			114,499			116,330
Dilutive effect of stock based compensation plans		-			-			807			-
Non-GAAP diluted weighted average shares outstanding		115,698			116,025			115,306			116,330

(2) Operating margin impact of non-GAAP adjustments:
	Three Months Ended						Nine Months Ended
	July 2,			July 4,			July 2,			July 4,
	2016			2015			2016			2015
GAAP operating margin		2.6	%		7.1	%		-0.5	%		6.7	%
Fair value of acquired deferred revenue		0.4	%		0.3	%		0.3	%		0.4	%
Fair value adjustment to deferred services cost		0.0	%		0.0	%		0.0	%		0.0	%
Stock-based compensation		4.8	%		4.6	%		6.1	%		4.0	%
Amortization of acquired intangibles		5.1	%		4.6	%		5.1	%		4.5	%
Acquisition-related charges		0.3	%		0.9	%		0.4	%		0.9	%
US pension plan termination-related costs		0.0	%		0.7	%		0.0	%		0.6	%
Legal settlement accrual		0.0	%		4.5	%		0.0	%		1.4	%
Restructuring charges		1.0	%		1.4	%		5.2	%		4.5	%
Non-GAAP operating margin		14.1	%		24.1	%		16.5	%		22.9	%

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