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PTC Beats on Earnings and Revenues in Q3, Raises Outlook

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PTC Inc. (PTC - Free Report) reported third-quarter fiscal 2021 non-GAAP earnings of 83 cents per share, up 34% on a year-over-year basis. The bottom line beat the Zacks Consensus Estimate by 29.7%.

Revenues came in at $436 million, up 24% year over year (up 19% at constant currency or cc) driven by strength across Core and Growth product groups as well as contribution from Arena. Fiscal third-quarter revenues also include impact from up-front license revenue recognition under ASC 606. The top line surpassed the Zacks Consensus Estimate by 5.9%.

In the past year, the company’s shares have returned 69.7% compared with industry’s growth of 37.6%.

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 $387.2 million increased 24.6% year over year. Perpetual license of $7.3 million increased 7.2% from the year-ago quarter’s figure.

Revenues by License, Support and Services

License revenues (37.5% of total revenues) were $163.6 million, up 38.3% from the year-ago quarter’s figure.

Support and cloud services revenues (53%) of $230.8 million increased 15.9% year over year.

Professional services revenues (9.5%) of $41.2 million, up 20.1% 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 $298 million, up 19% year over year (up 15% cc).

Revenues from Growth Product Group (which includes IoT, AR & Onshape) totaled $77 million, up 55% year over year (up 51% at cc).

Revenues from Focused Solutions Group (FSG) amounted to $61 million, up 16% year over year (up 12% at cc).

ARR Performance

Annualized recurring revenues (ARR) were $1.425 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 $986 million, up 14% year over year (up 11% at cc). Growth was driven by strength in PLM and CAD solutions.

ARR from Growth Product Group (IoT, AR & Onshape) came in at $256 million, up 60% year over year (up 57% at cc). The upside can be attributed to strength in Onshape and Arena Solutions.

ARR from FSG came in at $183 million, up 4% year over year (up 1% at cc).

Operating Details

Non-GAAP gross margin expanded 90 basis points (bps) on a year-over-year basis to 81.2%.

Total operating expenses increased 27.7% year over year to $267 million mainly due to research and development, sales and marketing along with general and administrative costs.

Operating income on a non-GAAP basis increased 28.4% year over year to $132.9 million.

Operating margin on a non-GAAP basis expanded 200 bps on a year-over-year basis to 31%.

Balance Sheet & Cash Flow

As of Jun 30, 2021 cash, cash equivalents and marketable securities were $366 million compared with $326 million as of Mar 31, 2021.

Total debt, net of deferred issuance costs, was $1.5 billion as of Jun 30, 2021, up from $1.5 billion, as of Mar 31, 2021. The company repaid $30 million under its revolver facility in the quarter under review.

Cash provided by operating activities came in at $88 million compared with the prior-quarter’s figure of $122 million.

Free cash flow was $85 million compared with $116 million reported in the previous quarter.


PTC anticipates continues to expect overall macroeconomic backdrop to start improving by the second half of fiscal 2021.

Driven by strong fiscal third-quarter results and changing currency impact, management revised its outlook for fiscal 2021.

Fiscal 2021 revenues are now projected between $1.733 billion and $1.763 billion compared with earlier guidance of $1.71-$1.74 billion.

The Zacks Consensus Estimate for revenues is currently pegged at $1.73 billion, suggesting year-over-year growth of 18.4%.

Non-GAAP earnings are now expected between $3.35 and $3.60 compared with $3.18 and $3.39 per share, which indicates rise of 31-40% year over year. The consensus mark for earnings is pegged at $3.33, suggesting year-over-year growth of 29.6%.

ARR is now expected to be $1.453-$1.478 billion compared with $1.445-$1.47 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.

On organic basis, ARR growth rate is expected in the band of 10-12% (at cc). 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.

Non-GAAP operating margin is now expected to be 32-33% compared with the previous range of 31-32%.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks worth considering in the broader technology sector are Avnet (AVT - Free Report) , CyberArk Software (CYBR - Free Report) and Digital Turbine (APPS - Free Report) . Avnet and Digital Turbine sport a Zacks Rank #1 (Strong Buy), while CyberArk carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Digital Turbine, Avnet and CyberArk are scheduled to release earnings on Aug 9, Aug 11 and Aug 12, respectively.

Long-term earnings growth rate for CyberArk, Avnet and Digital Turbine is currently pegged at 12.1%, 22.7% and 50%, respectively.

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