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PTC's Q3 Earnings & Revenues Miss Estimates, Stock Down

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PTC Inc (PTC - Free Report) reported third-quarter fiscal 2022 non-GAAP earnings of 97 cents per share, up 16.9% on a year-over-year basis. However, the figure missed the Zacks Consensus Estimate by 9.4%.

Revenues came in at $462.5 million, up 6% year over year (up 12% at constant currency or cc). The top line missed the Zacks Consensus Estimate by 2.8%.

The year-over-year improvement in the top line was driven by steady demand for products (digital transformation and SaaS) across all segments and all regions. The company is also working toward accelerating the SaaS transition by increasing the capacity of its Atlas platform and improving the SaaS capabilities of its core products, among others. Product Lifecycle Management (PLM) and computer-aided design (CAD)  businesses continue to witness healthy growth. Unfavorable forex movement and the impact of exiting Russia due to the Ukraine war were dampeners.

PTC Inc. Price, Consensus and EPS Surprise

 

PTC Inc. Price, Consensus and EPS Surprise a

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

 

PTC raised guidance for ARR and free cash flow and adjusted free cash flow guidance but lowered revenue guidance owing to forex headwinds for fiscal 2022. Revenues for the fiscal are now projected in the range of $1.900-$1.950 billion (up 5-8% year over year) compared with the earlier guidance of $1.905-$1.975 billion,

Following the quarterly announcement, PTC’s shares were down 1.1% in the premarket trading on Jul 28. In the past year, PTC has lost 11.8% compared with the industry’s decline of 13.8%.

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Top Line in Detail

Recurring revenues of $415.2 million rose 7.2% year over year. Perpetual license soared 13% to $8.2 million.

Revenues by License, Support and Services

License revenues (37.9% of total revenues) were $175.2 million, up 7.1% from the year-ago quarter’s figure.

Support and cloud services revenues (53.7%) of $248.2 million increased 7.5% year over year.

Professional services revenues (8.4%) were $39.1 million, down 5.2% year over year.

Revenues by Product Group

The company has two new business units, Digital Thread and Velocity. Digital Thread includes products like Creo computer-aided design or CAD, Windchill PLM, Thingworx IoT and Vuforia AR. The Velocity unit comprises products like Onshape CAD and Arena PLM.

Revenues from Digital Thread came in at $440 million, up 4% year over year. Revenues from the Velocity segment totaled $22 million, up 59%.

Revenues from Digital Thread - Core came in at $313 million, up 5% from the prior-year quarter’s levels.

Revenues from Digital Thread - Growth came in at $67 million, up 7% on a year-over-year basis.

Revenues from Digital Thread - FSG (Focused Solutions Group) came in at $60 million, down 2% from the prior-year quarter’s levels.

ARR Performance

Annualized recurring revenues (ARR) were $1.544 billion, up 9% year over year (up 16% at cc). The uptick was driven by the strong performance of the Core and Growth divisions. The acquisition of Codebeamer added $15 million to ARR.

ARR from Digital Thread - Core came in at $1.047 billion, up 6% year over year (up 14% at cc). Growth was driven by strength in PLM and CAD solutions.

ARR from Digital Thread - Growth came in at $205 million, up 13% year over year (up 19% at cc). The upside can be attributed to higher Digital Performance Management (DPM) deals.

ARR from Digital Thread - FSG totaled $203 million, up 11% year over year (up 17% at cc) driven by higher customer demand.

Velocity segment ARR came in at $88 million, up 29% (up 29% at cc) year over year.

Operating Details

Non-GAAP gross margin is almost unchanged on a year-over-year basis at 81.2%.

Total operating expenses increased 5.1% year over year to $280.5 million.

Operating income on a non-GAAP basis improved 17.2% year over year to $156 million.

Operating margin on a non-GAAP basis expanded 320 bps on a year-over-year basis to 33.7%, driven by strong top-line growth and expense management.

Balance Sheet & Cash Flow

As of Jun 30, 2022, cash, cash equivalents and marketable securities were $322 million compared with $307 million as of Mar 31, 2022.

Total debt, net of deferred issuance costs, was $1.43 billion as of Jun 30, 2022, compared with $1.26 billion as of Mar 31, 2022.

Cash provided by operating activities came in at $117 million compared with the prior quarter’s figure of $142.3 million.

Free cash flow was $112 million compared with $140.2 million reported in the previous quarter.

Fiscal 2022 Guidance

For fiscal 2022, ARR is now expected to be $1.660-$1.690 billion, which indicates a rise of 13-15% year over year at cc. Earlier, ARR was expected to be $1.640-$1.665 billion.

Non-GAAP operating expenses are anticipated to increase in the range of 2-3%. The company expects costs to increase owing to hiring and higher investments in the SaaS business.

For fiscal 2022, cash from operations is projected to be $430 million, indicating an increase of 17% on a year-over-year basis. Free cash flow is forecast to be $410 million, suggesting 19% growth. Adjusted free cash flow is expected to be $465 million, up 19% year over year. Earlier, free cash flow was forecast to be $405 million, suggesting 18% growth. Adjusted free cash flow was expected to be $455 million, up 16% year over year.

For the fiscal fourth quarter, PTC expects ARR to be between $1.660 and $1.690 billion. Cash from operations is projected to be $35 million and free cash flow is forecast to be $25 million.

Zacks Rank & Other Stocks to Consider

Currently, PTC carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the broader technology sector worth consideration are Synopsys (SNPS - Free Report) , Aspen Technology (AZPN - Free Report) and Badger Meter (BMI - Free Report) . BMI sports a Zacks Rank #1 (Strong Buy) while Synopsys and Aspen carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BMI’s 2022 earnings is pegged at $2.30 per share, up 7% in the past 60 days. Badger Meter’s earnings beat the Zacks Consensus Estimate in three of  the preceding four quarters, with the average being 12.6%. Shares of BMI have lost 8.7% of their value in the past year.

The Zacks Consensus Estimate for Synopsys 2022 earnings is pegged at $8.67 per share, unchanged in the past 60 days. The long-term earnings growth rate is anticipated to be 19.6%.

Synopsys earnings beat the Zacks Consensus Estimate in the last four quarters, the average being 2.7%. Shares of SNPS have increased 23.8% in the past year.

The Zacks Consensus Estimate for Aspen’s fiscal 2022 earnings is pegged at $5.49 per share, rising 0.4% in the past 60 days. The long-term earnings growth rate is anticipated to be 16.3%.

Aspen’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average being 4%. Shares of AZPN have grown 34.8% in the past year.


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