Revenue, Operating Margin and EPS Exceed Guidance; Completes Subscription Transition; Raises Revenue and Free Cash Flow Guidance

BOSTON — (BUSINESS WIRE) — January 23, 2019 — PTC (NASDAQ: PTC) today reported financial results for its fiscal first quarter 2019.

Financial Summary - ASC 606 ⁽¹⁾

• Revenue of $335 million
• GAAP net income was $21 million or $0.18 per diluted share; non-GAAP net income was $67 million or $0.56 per diluted share
• GAAP operating margin of 9%; non-GAAP operating margin of 27%

Financial Summary ASC 605 ⁽¹⁾

• Revenue of $339 million
• GAAP net income was $19 million or $0.16 per diluted share; non-GAAP net income was $68 million or $0.57 per diluted share
• GAAP operating margin of 10%; non-GAAP operating margin of 28%

⁽¹⁾ We adopted ASC 606 on October 1, 2018, which impacted our reported financial results, including the timing and classification of revenue. For comparability purposes, and unless otherwise specified, the amounts included in the commentary below refer to results under ASC 605, as shown in our financial statements, including the notes thereto.

“Our financial performance in the first quarter was solid, with revenue, operating margin and EPS results exceeding our expectations,” said James Heppelmann, President and CEO. “We continued to make important strides against our major strategic initiatives during the quarter, most notably, we successfully completed our transition to a subscription business model.”

Other first quarter 2019 results:
Additional operating and financial highlights are set forth below. Information about our bookings and other reporting measures (as updated) is provided below. We adopted ASC 606 on October 1, 2018, which impacted our reported financial results, including the timing and classification of revenue. For comparability purposes, and unless otherwise specified, the amounts included in the commentary below refer to results under ASC 605 as shown in our financial statements, including the notes thereto. For additional details, please refer to the prepared remarks and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com.

Additional Operating Highlights:

License and subscription bookings: Q1’19 license and subscription bookings were $101 million, consistent with last year on a constant currency basis.

Software revenue: Q1’19 software revenue was $299 million, an increase of 13% year over year or 15% in constant currency.

Recurring Software revenue: Q1’19 software recurring revenue was $258 million, an increase of 11% year over year or 13% in constant currency, despite one less day in the quarter, negatively impacting growth by about 100 bps.

IoT software revenue: Q1’19 IoT software revenue was $34 million, up 30% year over year or 31% on a constant currency basis, driven by 35% constant currency growth in recurring IoT software revenue.

Annualized recurring revenue (ARR): Q1’19 ARR was $1,045 million, an increase of 13% year over year and the eighth consecutive quarter of double-digit year-over-year growth.

Deferred revenue: Billed deferred revenue increased 15% year over year to $496 million. Total deferred revenue – billed and unbilled - increased $191 million or 16% year over year. Billed Deferred Revenue primarily relates to software agreements invoiced to customers for which the revenue has not yet been recognized. Billed Deferred Revenue fluctuates quarterly based upon the contractual billings dates in our recurring revenue contracts, the timing of our fiscal reporting periods, and FX impacts.

Operating margin: GAAP operating margin in the first quarter was 10%, compared to 6% in the same period last year; non-GAAP operating margin was 28%, compared to 16% in the same period last year.

Total cash, cash equivalents, and marketable securities: As of the end of the first quarter total cash, cash equivalents, and marketable securities was $333 million and total debt, net of deferred issuance costs, was $778 million.

Restructuring: Restructuring related to our workforce realignment was $17 million.

Management's 2019 Financial Outlook:
The Company's second quarter and fiscal year 2019 revenue and diluted earnings per share guidance is provided below. The revenue and diluted earnings per share guidance is provided on both a GAAP and a non-GAAP basis, and in accordance with both ASC 606 and ASC 605. Non-GAAP financial measures exclude the income statement effects of acquisition adjustments to deferred revenue, stock-based compensation, amortization of acquired intangible assets, acquisition-related transaction costs, restructuring charges and measurement-period adjustments related to the Tax Cuts and Jobs Act.