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PTC Inc (PTC) Surpasses Q1 Earnings and Revenue Estimates

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PTC Inc. (PTC - Free Report) reported first-quarter fiscal 2021 non-GAAP earnings of 97 cents per share, up 70.1% on a year-over-year basis. Also, the bottom line beat the Zacks Consensus Estimate by 44.8%.

Revenues came in at $429.1 million, up 20.5% year over year. The improvement was driven by strength across Core and Growth product groups. The top line surpassed the Zacks Consensus Estimate by 12%.

The company also announced reorganizing of the SaaS business unit that currently constitutes SaaS business of Onshape and Vuforia. The unit will now include Arena Solutions’ business and will be led by Mike DiTullio. The unit now accounts for $100 million of annualized recurring revenues (ARR) and 20% of the company’s bookings.

PTC Inc. Price, Consensus and EPS Surprise

 

PTC Inc. Price, Consensus and EPS Surprise

PTC Inc. price-consensus-eps-surprise-chart | PTC Inc. Quote

 

Top Line in Detail

Recurring revenues of $385 million increased 26.1% year over year. Perpetual license of $8.46 million declined 5.9% 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 (41.3% of total revenues) were $177.2 million, up 43.5% from the year-ago quarter’s figure.

Support and cloud services revenues (50.4%) of $216.3 million increased 13.3% year over year.

Professional services revenues (8.3%) of $35.6 million declined 14.6% 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 $309 million, up 23% year over year (up 19% at constant currency or cc).

Revenues from Growth Product Group (which includes IoT, AR & Onshape) totaled $68 million, up 29% year over year (up 26% at cc).

Revenues from Focused Solutions Group (FSG) amounted to $52 million, up 1% year over year (down 1% at cc).

ARR Performance

Annualized recurring revenues (ARR) were $1.343 billion, up 16% year over year (up 12% at cc). The uptick was driven by strong performance of Core and Growth divisions along with growth in the global channel.

ARR from Core Product Group (CAD & PLM) came in at $967 million, up 17% year over year (up 12% at cc). Growth was driven by strength in PLM and CAD solutions.

ARR from Growth Product Group (IoT, AR & Onshape) came in at $194 million, up 29% year over year (26% at cc). Year-over-year growth can be attributed to improvement in AR as well as strength in Onshape.

ARR from FSG came in at $182 million, up 2% year over year (unchanged at cc). The low growth rate reflects weak demand trends across verticals like retail and travel that are badly hit by COVID-19 disruption.

Operating Details

Non-GAAP gross margin expanded 410 basis points (bps) on a year-over-year basis to 82.3%.

Total operating expenses increased 5.9% year over year to $252 million mainly due to higher sales and marketing along with general and administrative costs.

Operating income on a non-GAAP basis increased 64.5% year over year to $153 million.

Consequently, operating margin on a non-GAAP basis expanded 970 bps on a year-over-year basis to 35.8%.

Balance Sheet & Cash Flow

As of Dec 31, cash, cash equivalents and marketable securities were $399 million compared with the prior-quarter’s figure of $335 million.

Total debt, net of deferred issuance costs, was $988 million as of Dec 31, 2020, down from the prior-quarter’s figure of $1 billion, as of Sep 30, 2020.

Cash provided by operating activities came in at $114 million compared with the prior-quarter’s figure of $34 million.

Free cash flow was $111 million compared with $29.2 million reported in the previous quarter.

Guidance

PTC anticipates near-term macroeconomic conditions to remain steady despite COVID-19 related disruptions. Management continues to expect overall macroeconomic backdrop to start improving by the second half of fiscal 2021.

Driven by strong fiscal first quarter results and acquisition of Arena Solutions, management revised its outlook for fiscal 2021.

Fiscal 2021 revenues are now projected between $1.69 billion and $1.73 billion compared with earlier guidance of $1.55-$1.6 billion.

The Zacks Consensus Estimate for revenues is currently pegged at $1.59 billion.

Further, non-GAAP earnings are now expected between $3.05 and $3.25 compared with $2.65 and $2.85 per share, which indicates rise of 19-26% year over year. The consensus mark for earnings is pegged at $2.78.

ARR is expected to be $1.47-$1.5 billion compared with $1.385-$1.42 billion, which indicates rise of 16-18% 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.

On organic basis, ARR growth rate is now expected in the band of 10-12% (on a constant-currency basis) compared with earlier range of 9-10%. Buyout of Arena Solutions is anticipated to contribute 400 bps to ARR growth.

Operating expenses are now anticipated to increase 16% from 10% projected earlier. This is mainly due to Arena Solutions’ buyout.

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 30-31% compared with the previous range of 28-29%.

Zacks Rank & Stocks to Consider

Currently, PTC carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Qorvo (QRVO - Free Report) , Synaptics Incorporated (SYNA - Free Report) and Microchip (MCHP - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Qorvo is set to report its quarterly results on Feb 3, while Synaptics and Microchip are scheduled to report their quarterly results on Feb 4.

Long-term earnings growth rate of Qorvo, Synaptics and Microchip is pegged at 15.8%, 10% and 14.9%, respectively.

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