PTC Announces Fiscal First Quarter 2020 Results;

PTC’s Fiscal First Quarter 2020 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, January 22, 2020.

To access the live webcast, we recommend you visit PTC’s Investor Relations website at investor.ptc.com 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 replay will be available for 10 days following the call by dialling 800-308-7858 and entering the passcode 1308. 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
			December 28,			December 29,
				2019			2018

Revenue:
	Recurring revenue		$	305,368		$	251,438
	Perpetual license			8,998			41,805
	Professional services			41,744			41,446
Total revenue⁽¹⁾				356,110			334,689

Cost of revenue				87,405			77,352

Gross margin				268,705			257,337

Operating expenses:
	Sales and marketing ⁽²⁾			107,604			104,218
	Research and development ⁽²⁾			65,308			60,782
	General and administrative ⁽²⁾			44,557			37,864
	Amortization of acquired intangible assets			6,777			5,936
	Restructuring and headquarters charges, net			14,034			18,493
Total operating expenses				238,280			227,293

Operating income				30,425			30,044
	Other expense, net			(11,394	)		(9,621	)
Income before income taxes				19,031			20,423
	Benefit for income taxes			(16,424	)		(562	)
Net income			$	35,455		$	20,985

Earnings per share:
	Basic		$	0.31		$	0.18
		Weighted average shares outstanding		115,190			118,323

	Diluted		$	0.31		$	0.18
		Weighted average shares outstanding		115,691			119,638


	(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
		December 28,		December 29,
		2019		2018
License revenue ⁽¹⁾		$	123,430	$	105,322
Support and cloud services revenue			190,936		187,921
Professional services revenue			41,744		41,446
	Total revenue	$	356,110	$	334,689

(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
		December 28,		December 29,
		2019		2018
Cost of revenue		$	3,043	$	3,111
Sales and marketing			7,452		9,722
Research and development			6,932		4,900
General and administrative			10,509		11,674
	Total stock-based compensation	$	27,936	$	29,407

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

			Three Months Ended
			December 28,			December 29,
				2019			2018

GAAP revenue			$	356,110		$	334,689
	Fair value adjustment of acquired deferred subscription revenue			-			66
	Fair value adjustment of acquired deferred services revenue			-			207
Non-GAAP revenue			$	356,110		$	334,962

GAAP gross margin			$	268,705		$	257,337
	Fair value adjustment of acquired deferred revenue			-			273
	Fair value adjustment to deferred services cost			-			(85	)
	Stock-based compensation			3,043			3,111
	Amortization of acquired intangible assets included in cost of revenue			6,799			6,717
Non-GAAP gross margin			$	278,547		$	267,353

GAAP operating income			$	30,425		$	30,044
	Fair value adjustment of acquired deferred revenue			-			273
	Fair value adjustment to deferred services cost			-			(85	)
	Stock-based compensation			27,936			29,407
	Amortization of acquired intangible assets included in cost of revenue			6,799			6,717
	Amortization of acquired intangible assets			6,777			5,936
	Acquisition-related and other transactional charges included in general and administrative costs			7,129			419
	Restructuring charges, net			14,034			16,586
	Headquarters relocation charges			-			1,907
Non-GAAP operating income ⁽¹⁾			$	93,100		$	91,204

GAAP net income			$	35,455		$	20,985
	Fair value adjustment of acquired deferred revenue			-			273
	Fair value adjustment to deferred services cost			-			(85	)
	Stock-based compensation			27,936			29,407
	Amortization of acquired intangible assets included in cost of revenue			6,799			6,717
	Amortization of acquired intangible assets			6,777			5,936
	Acquisition-related and other transactional charges included in general and administrative costs			7,129			419
	Restructuring charges, net			14,034			16,586
	Headquarters relocation charges			-			1,907
	Income tax adjustments ⁽²⁾			(31,966	)		(14,855	)
Non-GAAP net income			$	66,164		$	67,290

GAAP diluted earnings per share			$	0.31		$	0.18
	Fair value adjustment of acquired deferred revenue			-			-
	Stock-based compensation			0.24			0.25
	Amortization of acquired intangibles			0.12			0.11
	Acquisition-related and other transactional charges			0.06			-
	Restructuring charges, net			0.12			0.14
	Headquarters relocation charges			-			0.02
	Income tax adjustments			(0.28	)		(0.12	)
Non-GAAP diluted earnings per share			$	0.57		$	0.56

	(1)	Operating margin impact of non-GAAP adjustments:
			Three Months Ended
			December 28,			December 29,
				2019			2018
	GAAP operating margin			8.5	%		9.0	%
		Fair value adjustment of acquired deferred revenue		0.0	%		0.1	%
		Fair value adjustment to deferred services cost		0.0	%		0.0	%
		Stock-based compensation		7.8	%		8.8	%
		Amortization of acquired intangibles		3.8	%		3.8	%
		Acquisition-related and other transactional charges		2.0	%		0.1	%
		Restructuring charges, net		3.9	%		5.0	%
		Headquarters relocation charges		0.0	%		0.6	%
	Non-GAAP operating margin			26.1	%		27.2	%

	(2)	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 2020 and 2019 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.

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


	December 28,		September 30,
	2019		2019

ASSETS

Cash and cash equivalents	$	237,017	$	269,579
Marketable securities		57,480		57,435
Accounts receivable, net		344,412		372,743
Property and equipment, net		105,171		105,531
Goodwill and acquired intangible assets, net		1,872,059		1,408,128
Lease assets, net ⁽¹⁾		165,484		-
Other assets		498,204		451,172

Total assets	$	3,279,827	$	2,664,588

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue	$	368,089	$	396,632
Debt, net of deferred issuance costs		1,124,345		669,134
Lease obligations ⁽¹⁾		225,263		-
Other liabilities		314,313		396,824
Stockholders' equity		1,247,817		1,201,998

Total liabilities and stockholders' equity	$	3,279,827	$	2,664,588

(1) In the first quarter of 2020, we adopted Accounting Standards Update 2016-02, Leases (Topic 842).

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



		Three Months Ended
		December 28,			December 29,
			2019			2018

Cash flows from operating activities:
	Net income	$	35,455		$	20,985
	Stock-based compensation		27,936			29,407
	Depreciation and amortization		19,588			20,053
	Accounts receivable		34,314			24,025
	Accounts payable and accruals		(15,522	)		(37,132	)
	Deferred revenue		(34,952	)		(21,820	)
	Income taxes		(42,702	)		(21,668	)
	Other		(16,605	)		7,364
Net cash provided by operating activities			7,512			21,214

Capital expenditures			(4,707	)		(30,332	)
Acquisition of businesses, net of cash acquired ⁽¹⁾			(467,749	)		(69,556	)
Borrowings (payments) on debt, net			455,000			135,000
Costs associated with issuance of common stock			-			(4,640	)
Payments of withholding taxes in connection with
	vesting of stock-based awards		(22,849	)		(33,788	)
Contingent consideration			-			(1,575	)
Other financing & investing activities			(1,968	)		(1,324	)
Foreign exchange impact on cash			1,991			2,041

Net change in cash, cash equivalents, and restricted cash			(32,770	)		17,040
Cash, cash equivalents, and restricted cash, beginning of period			270,689			261,093
Cash, cash equivalents, and restricted cash, end of period		$	237,919		$	278,133


		Three Months Ended
		December 28,			December 29,
			2019			2018
Cash provided by operating activities			7,512			21,214
Capital expenditures			(4,707	)		(30,332	)
	Free cash flow		2,805			(9,118	)
Restructuring payments ⁽²⁾			3,268			8,283
Acquisition-related payments			6,422			-
	Adjusted free cash flow		12,495			(835	)

(1)	In the three months ended December 28, 2019, we acquired Onshape for $468 million, net of cash acquired. In the three months ended December 29, 2018, we acquired Frustum for $70 million, net of cash acquired.
(2)	Restructuring payments include lease payments associated with exited facilities.

Important Disclosures

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