PTC today reported financial results for the second quarter ended April 2, 2016.
Q2 Fiscal 2016 Overview
Second quarter FY’16 GAAP revenue was $273 million; non-GAAP revenue was $274 million. GAAP net loss was $5 million or $0.05 per share; non-GAAP net income was $26 million or $0.23 per share.
As compared to the second quarter of FY’15, currency negatively impacted revenue by approximately $9 million and negatively impacted non-GAAP EPS by approximately $0.01 per share.
James Heppelmann, President and CEO said, “We were very pleased with our execution in Q2. Bookings exceeded the high-end of guidance, adoption of our subscription licensing model accelerated, support conversions to subscription accelerated sequentially, and we continued to gain traction in our IoT business.” Heppelmann added, “While a higher subscription mix negatively impacts near-term reported revenue and earnings, we believe significant long-term value will be created for our customers and shareholders by transitioning to a subscription model. Importantly, we remain committed to our track record of financial discipline, and when viewed on a mix-adjusted basis, according to our model, both our Q2 revenue and earnings per share would have exceeded the high end of our guidance range.”
Operational Overview
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 ptc.com.
- License and subscription bookings were $86 million; above the high end of the guidance range of $71 million to $81 million.
- For the quarter, subscription bookings were approximately 54% of total bookings, well above our guidance assumption of 26% and up from 14% a year ago. Based upon our model, this higher than guidance mix of subscription in the quarter, while expected to be positive long-term, reduced perpetual license revenue by approximately $24 million and reduced non-GAAP EPS by approximately $0.16 as compared to our guidance. As a rule of thumb, our model indicates that, on an annual basis, every 1% change in subscription mix will impact annual revenue by $3 million, and annual non-GAAP EPS by $0.02.
- Total subscription annualized contract value (ACV) was $23 million; above guidance of $10 million.
- Software revenue, which reflects a higher mix of subscription than last year, was down approximately $24 million or 9% on a year-over-year, constant currency basis. Our model indicates that the higher mix of subscription than last year lowered Q2’16 software revenue by approximately $30 million.
- Annualized recurring revenue (ARR) was approximately $742 million at the end of the second quarter of fiscal 2016.
- GAAP operating expenses were approximately $191 million; non-GAAP operating expenses were approximately $164 million. These results were at the low end of both the GAAP and non-GAAP guidance ranges.
- Q2’16 GAAP operating margin was 1% and non-GAAP operating margin was 14%. Q2’15 GAAP operating margin was 1% and non-GAAP operating margin was 23%. Based on our model, the higher mix of subscription in Q2’16 reduced Q2’16 non-GAAP operating margin by approximately 700 basis points as compared to guidance.
- For Q2’16, we recorded a GAAP income tax expense of $1.6 million, or $0.01 per share and a non-GAAP income tax expense of $6.8 million, or $0.06 per share. The non-GAAP tax rate for the quarter was 21%.
- Cash flow from operations was $49 million. Excluding $28 million paid in February in connection with the SEC and DOJ FCPA investigation related to our China business and $25 million paid in connection with the restructuring announced in October 2015, cash provided by operations for Q2’16 was $102 million and free cash flow was $97 million. We did not purchase any shares in Q2’16, as our share repurchases are planned for the second half of FY’16.
- We ended the quarter with total cash and cash equivalents of $368 million and total debt of $838 million.
