PTC reported financial results for the fourth quarter and full fiscal year ended September 30, 2015.
Q4 Fiscal 2015 Overview
Fourth quarter FY'15 revenue was $312.6 million. Net income was $9.0 million or $0.08 per share, which compares to revenue of $366.7 million and net income of $38.8 million or $0.33 per share in the fourth quarter FY'14.
Fourth quarter FY'15 non-GAAP revenue was $313.1 million. Non-GAAP net income was $77.1 million or $0.67 per share, which compares to non-GAAP revenue of $368.0 million and non-GAAP net income of $78.7 million or $0.67 per share, in the fourth quarter FY'14.
Fiscal 2015 Overview
FY'15 revenue was $1,255.2 million. Net income was $62.1 million or $0.54 per share, which compares to revenue of $1,357.0 million and net income of $160.2 million or $1.34 per share for FY'14.
FY'15 non-GAAP revenue was $1,259.1 million. Non-GAAP net income was $259.2 million or $2.23 per share, which compares to non-GAAP revenue of $1,358.2 million and non-GAAP net income of $260.4 million or $2.17 per share, for FY'14.
James Heppelmann, President and CEO said, "We delivered solid fourth quarter results including non-GAAP operating margin and non-GAAP EPS above the high-end of guidance, while also achieving a subscription bookings mix of 20% compared to our guidance of 14%."
As a rule of thumb, on an annual basis, every 1% change in subscription mix will raise or lower revenue by $3 million, non-GAAP operating margin by 20 basis points and non-GAAP EPS by $0.02.
Heppelmann added "Continuing the momentum we have experienced in our IoT business, fourth quarter IoT bookings and new logo additions were both strong, and we announced an agreement to acquire the Vuforia augmented reality technology platform. We were also pleased with the second consecutive quarter of strong performance in our SLM business, a reflection of pipeline rebuilding efforts in late FY'14 and early FY'15."
Operational Overview
For additional details, please refer to prepared remarks and financial data tables that have been posted to the Investor Relations section of our website at ptc.com.
· For the quarter, subscription bookings were 20% of license and subscription (L&S) bookings, up from 4% a year ago. For the year, subscription bookings were 17% of L&S bookings, up from 8% a year ago. As a rule of thumb, on an annual basis, every 1% change in subscription mix will raise or lower revenue by $3 million, non-GAAP operating margin by 20 basis points and non-GAAP EPS by $0.02.
· On a year over year, constant currency basis, software revenue was down 4% in Q4 FY'15 and was up 3% for FY'15 on both a GAAP and a non-GAAP basis.
· We added 108 new IoT customers during the quarter, bringing our total added for FY'15 to 290.
· In the quarter, we had 21 large deals (transactions with greater than $1 million of L&S bookings from a single customer), up from 18 in the fourth quarter FY'14; however, total bookings from large deals was down from Q4 FY'14. We did not have any mega deals (transactions with greater than $5 million of L&S bookings from a single customer) in Q4 FY'15, down from 2 in the fourth quarter FY'14. For the year, we had 57 large deals, down from 70 in FY'14. We had 1 mega deal in FY'15, down from 6 in FY'14.
· Q4 FY'15 GAAP operating margin was -2.3% (including $67.8 million of pension plan termination costs) and non-GAAP operating margin was 28%. FY'15 GAAP operating margin was 4.5% and non-GAAP operating margin was 24.2%.
· Cash used by operations for Q4 FY'15 was $12.6 million, including $26 million paid in connection with the termination of a U.S. pension plan. We repurchased $15 million of shares in Q4 FY'15 and Q4 FY'15 DSO was 56 days. For FY'15, cash flow from operations was $179.9 million, and we ended the year with total cash and cash equivalents of $273.4 million and total debt of $668 million.
Workforce Realignment
Reflecting a realignment of resources toward higher growth opportunities and our commitment to operating margin improvement, management expects to repurpose or eliminate approximately 8% of worldwide positions and to consolidate select facilities. These actions are expected to result in a restructuring charge of between $40 million and $50 million. The charge will be recorded in PTC's first two fiscal quarters of FY'16, the majority of which is attributable to termination benefits and substantially all of which will be paid in FY'16. The company expects these actions to reduce annual operating expenses by approximately $17 million year-over-year, with the full impact achieved as we exit the second fiscal quarter of fiscal 2016. The expected reduction in operating expense is net of a significant increase in variable compensation relative to FY'15, should we achieve the performance targets, and increased operating expenses associated with the ColdLight acquisition, and if completed, the Vuforia acquisition.
FY'16 Business Outlook
On October 1, 2015, we launched the second phase of our subscription program with the goal of accelerating the company's transition to a predominantly subscription-based licensing model. In keeping with the company's practice of providing shareholders with a broad set of financial and operational metrics to gauge the company's performance, we are providing new guidance disclosures. During our transition, we believe the most important metrics to focus on are License and Subscription Bookings, Subscription Mix of Bookings, Operating Expense and Free Cash Flow.
