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PTC Inc. (PTC) Down 0.3% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for PTC Inc. (PTC - Free Report) . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is PTC Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
PTC Q2 Earnings and Revenue Top Estimates
PTC Inc reported second-quarter fiscal 2021 non-GAAP earnings of $1.08 per share, up 83% on a year-over-year basis. Also, the bottom line beat the Zacks Consensus Estimate by 50%.
Revenues came in at $461.8 million, up 28.4% year over year driven by strength across Core and Growth product groups as well as contribution from Arena. Fiscal second-quarter revenues also include impact from up-front license revenue recognition under ASC 606. The top line surpassed the Zacks Consensus Estimate by 10.4%.
Top Line in Detail
Recurring revenues of $414.9 million increased 31.3% year over year. Perpetual license of $6.92 million declined 15.8% from the year-ago quarter’s figure due to end of perpetual license sales on Jan 1, 2019.
Revenues by License, Support and Services
License revenues (42.9% of total revenues) were $198 million, up 55.2% from the year-ago quarter’s figure.
Support and cloud services revenues (48.5%) of $223.8 million increased 13.9% year over year.
Professional services revenues (8.6%) of $40 million, up 12.7% year over year.
Revenues by Product Group
Revenues from Core Product Group — which includes computer-aided design (CAD) & Product Lifecycle Management (PLM) offerings — came in at $323 million, up 28% year over year (up 21% at constant currency or cc).
Revenues from Growth Product Group (which includes IoT, AR & Onshape) totaled $81 million, up 51% year over year (up 46% at cc).
Revenues from Focused Solutions Group (FSG) amounted to $58 million, up 9% year over year (up 5% at cc).
ARR Performance
Annualized recurring revenues (ARR) were $1.393 billion, up 18% year over year (up 15% at cc). The uptick was driven by strong performance of Core and Growth divisions along with contribution from Arena Solutions.
ARR from Core Product Group (CAD & PLM) came in at $960 million, up 13% year over year (up 10% at cc). Growth was driven by strength in PLM and CAD solutions.
ARR from Growth Product Group (IoT, AR & Onshape) came in at $252 million, up 64% year over year (61% at cc). The upside can be attributed to improvement in AR as well as strength in Onshape and Arena Solutions.
ARR from FSG came in at $180 million, up 1% year over year (down 1% at cc). The low growth rate reflects weak demand trends in commercial airlines sector, which is badly hit by COVID-19 disruption.
Operating Details
Non-GAAP gross margin expanded 340 basis points (bps) on a year-over-year basis to 83.1%.
Total operating expenses increased 19.5% year over year to $270.6 million mainly due to research and development, sales and marketing along with general and administrative costs.
Operating income on a non-GAAP basis increased 66.7% year over year to $172 million.
Consequently, operating margin on a non-GAAP basis expanded 800 bps on a year-over-year basis to 37%.
Balance Sheet & Cash Flow
As of Mar 31, 2021 cash, cash equivalents and marketable securities were $326 million compared with $399 million as of Dec 31, 2020.
Total debt, net of deferred issuance costs, was $1.5 billion as of Mar 31, 2021, up from $988 million, as of Dec 31, 2020. The company repaid $80 million under its revolver facility in the quarter under review.
Cash provided by operating activities came in at $122 million compared with the prior-quarter’s figure of $114 million.
Free cash flow was $116 million compared with $111 million reported in the previous quarter.
Guidance
PTC anticipates continues to expect overall macroeconomic backdrop to start improving by the second half of fiscal 2021.
Driven by strong fiscal second quarter results and changing currency impact, management revised its outlook for fiscal 2021.
Fiscal 2021 revenues are now projected between $1.71 billion and $1.74 billion compared with earlier guidance of $1.69-$1.73 billion.
Further, non-GAAP earnings are now expected between $3.18 and $3.39 compared with $3.05 and $3.25 per share, which indicates rise of 24-32% year over year.
ARR is now expected to be $1.445-$1.47 billion compared with $1.47-$1.5 billion, which indicates rise of 14-16% year over year. ARR guidance is inclusive of 2% headwind stemming from reduced backlog at the end of fiscal 2020 owing to coronavirus-related pressure on bookings. Changes in foreign currency eliminate the prior expected 200 bps currency tailwind to ARR.
On organic basis, ARR growth rate is expected in the band of 10-12% (on a constant-currency basis). Buyout of Arena Solutions is anticipated to contribute 400 bps to ARR growth.
Cash from operations is projected to be $365 million, indicating an increase of 55% on a year-over-year basis. Free cash flow is forecast to be $340 million, which suggests 60% year-over-year growth in fiscal 2021.
Further, non-GAAP operating margin is expected to be 31-32% compared with the previous range of 30-31%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -12% due to these changes.
VGM Scores
Currently, PTC Inc. has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PTC Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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PTC Inc. (PTC) Down 0.3% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for PTC Inc. (PTC - Free Report) . Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is PTC Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
PTC Q2 Earnings and Revenue Top Estimates
PTC Inc reported second-quarter fiscal 2021 non-GAAP earnings of $1.08 per share, up 83% on a year-over-year basis. Also, the bottom line beat the Zacks Consensus Estimate by 50%.
Revenues came in at $461.8 million, up 28.4% year over year driven by strength across Core and Growth product groups as well as contribution from Arena. Fiscal second-quarter revenues also include impact from up-front license revenue recognition under ASC 606. The top line surpassed the Zacks Consensus Estimate by 10.4%.
Top Line in Detail
Recurring revenues of $414.9 million increased 31.3% year over year. Perpetual license of $6.92 million declined 15.8% from the year-ago quarter’s figure due to end of perpetual license sales on Jan 1, 2019.
Revenues by License, Support and Services
License revenues (42.9% of total revenues) were $198 million, up 55.2% from the year-ago quarter’s figure.
Support and cloud services revenues (48.5%) of $223.8 million increased 13.9% year over year.
Professional services revenues (8.6%) of $40 million, up 12.7% year over year.
Revenues by Product Group
Revenues from Core Product Group — which includes computer-aided design (CAD) & Product Lifecycle Management (PLM) offerings — came in at $323 million, up 28% year over year (up 21% at constant currency or cc).
Revenues from Growth Product Group (which includes IoT, AR & Onshape) totaled $81 million, up 51% year over year (up 46% at cc).
Revenues from Focused Solutions Group (FSG) amounted to $58 million, up 9% year over year (up 5% at cc).
ARR Performance
Annualized recurring revenues (ARR) were $1.393 billion, up 18% year over year (up 15% at cc). The uptick was driven by strong performance of Core and Growth divisions along with contribution from Arena Solutions.
ARR from Core Product Group (CAD & PLM) came in at $960 million, up 13% year over year (up 10% at cc). Growth was driven by strength in PLM and CAD solutions.
ARR from Growth Product Group (IoT, AR & Onshape) came in at $252 million, up 64% year over year (61% at cc). The upside can be attributed to improvement in AR as well as strength in Onshape and Arena Solutions.
ARR from FSG came in at $180 million, up 1% year over year (down 1% at cc). The low growth rate reflects weak demand trends in commercial airlines sector, which is badly hit by COVID-19 disruption.
Operating Details
Non-GAAP gross margin expanded 340 basis points (bps) on a year-over-year basis to 83.1%.
Total operating expenses increased 19.5% year over year to $270.6 million mainly due to research and development, sales and marketing along with general and administrative costs.
Operating income on a non-GAAP basis increased 66.7% year over year to $172 million.
Consequently, operating margin on a non-GAAP basis expanded 800 bps on a year-over-year basis to 37%.
Balance Sheet & Cash Flow
As of Mar 31, 2021 cash, cash equivalents and marketable securities were $326 million compared with $399 million as of Dec 31, 2020.
Total debt, net of deferred issuance costs, was $1.5 billion as of Mar 31, 2021, up from $988 million, as of Dec 31, 2020. The company repaid $80 million under its revolver facility in the quarter under review.
Cash provided by operating activities came in at $122 million compared with the prior-quarter’s figure of $114 million.
Free cash flow was $116 million compared with $111 million reported in the previous quarter.
Guidance
PTC anticipates continues to expect overall macroeconomic backdrop to start improving by the second half of fiscal 2021.
Driven by strong fiscal second quarter results and changing currency impact, management revised its outlook for fiscal 2021.
Fiscal 2021 revenues are now projected between $1.71 billion and $1.74 billion compared with earlier guidance of $1.69-$1.73 billion.
Further, non-GAAP earnings are now expected between $3.18 and $3.39 compared with $3.05 and $3.25 per share, which indicates rise of 24-32% year over year.
ARR is now expected to be $1.445-$1.47 billion compared with $1.47-$1.5 billion, which indicates rise of 14-16% year over year. ARR guidance is inclusive of 2% headwind stemming from reduced backlog at the end of fiscal 2020 owing to coronavirus-related pressure on bookings. Changes in foreign currency eliminate the prior expected 200 bps currency tailwind to ARR.
On organic basis, ARR growth rate is expected in the band of 10-12% (on a constant-currency basis). Buyout of Arena Solutions is anticipated to contribute 400 bps to ARR growth.
Cash from operations is projected to be $365 million, indicating an increase of 55% on a year-over-year basis. Free cash flow is forecast to be $340 million, which suggests 60% year-over-year growth in fiscal 2021.
Further, non-GAAP operating margin is expected to be 31-32% compared with the previous range of 30-31%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -12% due to these changes.
VGM Scores
Currently, PTC Inc. has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PTC Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.