PTC (NASDAQ:PTC) Inc. PTC reported fourth-quarter fiscal 2021 non-GAAP earnings of $1.10 per share, up 41% on a year-over-year basis. The bottom line beat the Zacks Consensus Estimate by 66.7%.
Revenues came in at $481 million, up 23% year over year (up 21% at constant currency or cc) driven by strength across Core and Growth product groups as well as contribution from Arena. The quarterly revenues also include the impact from up-front license revenue recognition under ASC 606. The top line surpassed the Zacks Consensus Estimate by 12.4%.
For fiscal 2021, the company reported non-GAAP earnings of $3.97 per share, up 54.5% on a year-over-year basis. Revenues came in at $1.807 million, up 24% year over year (up 20% at constant currency or cc).
The company is also working toward accelerating software as a service (SaaS) transition by increasing the capacity of its Atlas (NYSE:ATCO) platform and improving SaaS capabilities of its core products among others, noted management.
The transition is aimed at driving double-digit long-term growth of the company’s core business, added management. However, restructuring payments are anticipated to affect cash flow in the first three quarters of fiscal 2022, stated management.
PTC Inc. Price, Consensus and EPS Surprise
PTC Inc. price-consensus-eps-surprise-chart | PTC Inc. Quote
The company also created two new business units namely — 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.
Top Line in Detail
Recurring revenues of $429.4 million increased 22.6% year over year. Perpetual license of $10.4 million increased 19.5% from the year-ago quarter’s figure.
Revenues by License, Support and Services
License revenues (41.5% of total revenues) were $199.3 million, up 41.8% from the year-ago quarter’s figure.
Support and cloud services revenues (50%) of $240.4 million increased 10.2% year over year.
Professional services revenues (8.5%) of $40.9 million, up 27.1% 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 $328 million, up 21% year over year (up 19% cc).
Revenues from Growth Product Group (which includes IoT, AR & Onshape) totaled $91 million, up 35% year over year (up 34% at cc).
Revenues from Focused Solutions Group (FSG) amounted to $61 million, up 18% year over year (up 17% at cc).
Revenue by Product Group (New)
Revenues from Digital Thread came in at $465 million, up 20% year over year. Revenues in the Velocity segment came in at $16 million, up 586% year over year.
Revenues from Digital Thread - Core came in at $328 million, up 21% from the prior-year quarter’s levels.
Revenues from Digital Thread - Growth came in at $75 million, increasing 16% from the year-ago quarter’s figure.
Revenues from Digital Thread - FSG came in at $61 million, increasing 18% from the prior quarter year.
ARR Performance
Annualized recurring revenues (ARR) were $1.475 billion, up 16% year over year (up 16% 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 $1.013 billion, up 11% 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 $272 million, up 50% year over year (up 50% at cc). The upside can be attributed to strength in Onshape and Arena Solutions as well as IoT offerings.
ARR from FSG came in at $190 million, up 6% year over year (up 6% at cc) driven by systems and software engineering solutions.
Operating Details
Non-GAAP gross margin expanded 70 basis points (bps) on a year-over-year basis to 82%.
Total operating expenses increased 11% year over year to $265.8 million mainly due to research and development, sales and marketing along with general and administrative costs.
Operating income on a non-GAAP basis increased 42.4% year over year to $176.1 million.
Operating margin on a non-GAAP basis expanded 500 bps on a year-over-year basis to 36.6%.
Balance Sheet & Cash Flow
As of Sep 30, 2021, cash, cash equivalents and marketable securities were $327 million compared with $366 million as of Jun 30, 2021.
Total debt, net of deferred issuance costs, was $1.4 billion as of Sep 30, 2021, up from $1.5 billion, as of Jun 30, 2021. The company repaid $40 million under its revolver facility in the quarter under review.
Cash provided by operating activities came in at $45 million compared with the prior-quarter’s figure of $88 million.
Free cash flow was $32 million compared with $85 million reported in the previous quarter.
In the quarter under review, the company repurchased shares worth $30 million.
Guidance
PTC continues to expect overall macroeconomic backdrop to be consistent in the first half of 2022 and the same to start moderating in the second half of fiscal 2022.
Fiscal 2022 revenues are now projected between $1.85 billion and $1.975 billion, which indicates a rise of 2-9% year over year.
The Zacks Consensus Estimate for revenues is currently pegged at $1.89 billion, suggesting year-over-year growth of 7.9%.
ARR is now expected to be $1.615-$1.66 billion, which indicates a rise of 10-13% year over year.
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 SaaS business.
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 $400 million, which suggests 16% year-over-year growth in fiscal 2022.
Zacks Rank & Stocks to Consider
Currently, PTC carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector include HP Inc (NYSE:HPQ) HPQ, Synaptics (NASDAQ:SYNA) Incorporated SYNA and Etsy (NASDAQ:ETSY) ETSY. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Long-term earnings growth rate of HP Inc, Synaptics and Etsy is pegged at 12.7%, 10% and 19.7%, respectively.
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