Industry Summary Articles

PTC reported financial results for its fiscal fourth quarter and full year ended September 30, 2021. 

"Our performance in 2021 reflects strong execution against the financial guidance we set at the beginning of our fiscal year.  Capped by an outstanding fourth quarter, in fiscal 2021 we delivered our fourth consecutive year of double-digit organic ARR growth, while also delivering operating cash flow growth of 58% and free cash flow growth in excess of 60%," said James Heppelmann, President and CEO, PTC.

"In Q4 and throughout the year we saw growth across all product segments and geographies. Our Core CAD and PLM products continued to outpace market growth, and the strong performance of our Onshape and Arena businesses reflects the growing momentum for cloud-native SaaS technologies in the industrial software market," continued Heppelmann.

"Building on a track record of solid financial performance and market leading technology, we are accelerating our SaaS transition timeline by implementing key initiatives that better align us to SaaS best practices, including reorganizing our customer success organization and combining product development, delivery, and support under one umbrella.  We are also incrementally investing in our Atlas platform, the SaaS transition of our Core CAD and PLM products, and product and go-to-market initiatives for our cloud-native Onshape and Arena businesses.  These changes enable PTC to accelerate the transition to SaaS across our portfolio, begin moving our on-premise customers to SaaS offerings sooner than previously contemplated, and expand contribution margins. These moves enhance PTC's ability to support customers and deliver strong top-line growth coupled with strong free cash flow, expanding our opportunity to deliver shareholder value over the long-term," concluded Heppelmann.

Fourth quarter and full year 2021 highlights ¹

Key operating and financial highlights are set forth below. For additional details, please refer to the Q4'21 earnings presentation and financial data tables that have been posted to the Investor Relations section of our website.

• ARRwas $1.47 billion at the end of Q4'21 and FY'21, representing growth of 16%, and 16% in constant currency, compared to Q4'20 and FY'20. Organic growth was 11% as of the end of Q4'21, or 12% in constant currency, compared to Q4'20.
• Cash flow from operations was $45 million and free cash flow was $32 million in Q4'21, compared to Q4'20 cash flow from operations of $34 million and free cash flow of $29 million. For FY'21, cash flow from operations was $369 million and free cash flow was $344 million, compared to FY'20 cash flow from operations of $234 million and free cash flow of $214 million.
• Revenuewas $481 million in Q4'21 compared to $391 million in Q4'20, growth of 23%, or 21% in constant currency, and revenue for FY'21 was $1,807 million compared to $1,458 million in FY'20, growth of 24%, or 20% in constant currency, driven primarily by strong execution, as well as the impact of up-front license revenue recognition under ASC 606, and a modest contribution from Arena.
• Operating margin was 24% in Q4'21, compared to 17% in Q4'20. Non-GAAP operating margin in Q4'21 was 37%, compared to 32% in Q4'20. For FY'21, operating margin was 21%, compared to 14% in FY'20, and non-GAAP operating margin was 35%, compared to 29% in FY'20.
• Earnings per sharewas $2.46 in Q4'21, compared to $0.46 in Q4'20. Non-GAAP earnings per share in Q4'21 was $1.10 compared to $0.78 in Q4'20. For FY'21, earnings per share was $4.03, compared to $1.12 in FY'20, and non-GAAP earnings per share was $3.97 compared to $2.57 in FY'20. The increase in EPS is due to solid execution, as well as a $69 million gain on our investment in Matterport, Inc. recorded in Q4'21 and a $137 million release in Q4'21 of our U.S. valuation allowance as we will be more likely than not to realize the majority of our deferred tax assets in the U.S.
• Total cash and cash equivalents as of the end of Q4'21 was $327 million, In addition, we held a $78 million equity investment in Matterport, Inc., currently subject to trading restrictions; total debt, net of deferred issuance costs, was $1.4 billion as of the end of Q4'21. We repaid $40 million on our revolving credit facility in Q4'21.
• Stock repurchases were $30 million in Q4'21.

Fiscal 2022 Guidance

"PTC again delivered fourth quarter and full-year 2021 financial results in line with or exceeding the guidance we established at the beginning of the year," said Kristian Talvitie, EVP and CFO, PTC. "The accelerated reorganization and investments we are undertaking this year are designed to better align PTC to our SaaS future and are expected to de-risk our path towards delivering on our mid-term cash flow targets.  Accordingly, we will record a $45 to $50 million restructuring charge in Q1.  On a go-forward basis, our operating model will be more scalable, resulting in a sustained higher cash contribution margin.  We expect to deliver ARR growth of 10% to 13%, approximately $430 million of cash from operations and approximately $400 million of Free Cash Flow, including approximately $50 million of restructuring payments in FY22."

Our FY'22 financial guidance includes the assumptions below:

• We assume the current macro environment to remain consistent H1'22, beginning to moderate in H2'22.
• ARR growth is expected to be approximately 15% in Q1'22, stronger than in the remainder of fiscal '22, since Q1'21 did not include ARR for Arena, which was acquired in Q2'21. From Q2 through Q4 of fiscal '22, we expect approximately linear performance, with consistent year-over-year growth rates.
• We expect churn to improve by approximately 100 basis points over FY'21.
• At the mid-point of ARR guidance, we expect GAAP operating expenses to increase approximately 4-5% and non-GAAP operating expense to increase approximately 2-3%.
• Costs are expected to ramp throughout the year due to hiring and increased SaaS investments.
• Total estimated pre-tax adjustments of $275 million - $280 million outlined below, as well as any additional tax effects and discrete tax items (which are not known or reflected).
  • $58 million intangible asset amortization expense
  • $172 million stock-based compensation expense
  • $45-50 million restructuring and other charges.
  • Fluctuations in the value of our Matterport investment are excluded from both GAAP and non-GAAP guidance.
• Related to the restructuring, we expect:
  • P&L charges of approximately $45 million to $50 million, primarily in Q1'22.
  • Cash outflows for restructuring payments of approximately $50 million to $55 million, with approximately two-thirds occurring in H1'22 and the majority of the remaining payments in Q3'22.
• Capital expenditures are expected to be approximately $30 million.
• In FY'22, our GAAP tax rate is expected to be approximately 20% and our non-GAAP tax rate is expected to be approximately 19%.
• We target to return approximately 25% of our free cash flow excluding restructuring payments to our shareholders through share repurchases, as we continue to rapidly de-lever. After de-levering, we would expect to resume returning 50% of our FCF to shareholders through share repurchases.

PTC's Fiscal Fourth Quarter and Full Year 2021 Results Conference Call
The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, November 3, 2021.

To participate in the live conference call, dial (888) 330-2384 or (240) 789-2701and provide the passcode 4098724, or log in to the webcast, available on PTC's Investor Relations website. A replay will also be available.

To view the original press release, please click here.

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