PTC reported financial results for its first fiscal quarter ended December 31, 2021.
"Our fiscal 2022 is off to a solid start with our key operating and financial metrics showing strong performance. In Q1, we delivered constant currency ARR growth of 16% to end the quarter at $1.51 billion, plus operating cash flow of $138 million and adjusted free cash flow of $145 million," said James Heppelmann, President and CEO, PTC.
"In Q1 we saw growth across our product portfolio and in all geographies over the same period last year as our customers continue to invest in our offerings to drive their digital transformation initiatives", continued Heppelmann. "Demand for SaaS offerings is high as shown by high growth rates of our cloud-native Onshape and Arena products, and our CAD and PLM businesses continue to outpace market growth."
"We are accelerating our multi-year SaaS transformation, and our strong performance this quarter has enabled us to raise the low end of our constant currency ARR guidance and positions us well to deliver on our cash flow targets for 2022," concluded Heppelmann.
First Quarter 2022 Highlights1
Key operating and financial highlights are set forth below. For additional details, please refer to the Q1'22 earnings presentation and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com.
- ARR was $1,496 million at the end of Q1'22, up 12% compared to Q1'21. On a constant currency basis, ARR was $1,507 million, up 16% compared to Q1'21, and above guidance of $1,500 million. Organic constant currency growth was 11%.
- Cash flow from operations was $138 million, free cash flow was $134 million, and adjusted free cash flow was $145 million in Q1'22, compared to Q1'21 cash flow from operations of $114 million, free cash flow of $111 million, and adjusted free cash flow of $121 million.
- Revenuewas $458 million in Q1'22 compared to $429 million in Q1'21, representing growth of 7%, or 8% in constant currency. Revenue is impacted by ASC 606.
- Operating margin was 14% in Q1'22, compared to 21% in Q1'21, primarily driven by $34 million of restructuring expense. Non-GAAP operating margin in Q1'22 was 35%, compared to 36% in Q1'21. Operating margin is impacted because revenue is impacted by ASC606.
- Earnings per sharewas $0.39 in Q1'22, compared to $0.20 in Q1'21. Non-GAAP earnings per share in Q1'22 was $0.95, compared to $0.97 in Q1'21. EPS is impacted because revenue is impacted by ASC606.
- Total cash and cash equivalents as of the end of Q1'22 was $296 million. In addition, we held an equity investment in Matterport, Inc., valued at $87 million as of December 31, 2021. Gross debt was $1.45 billion as of the end of Q1'22.
- Stock repurchases were $120 million in Q1'22. An additional $5 million of repurchases made in Q1'22 was settled early in Q2'22.
Q2'22 and Fiscal 2022 Guidance
"PTC delivered strong first quarter results modestly exceeding our expectations," said Kristian Talvitie, EVP and CFO, PTC. "While we are reducing the range for the total restructuring charge from $45 to $50 million to $40 to $45 million, and the expected restructuring related cash payments from $50 to $55 million to $45 to $50 million, from a cash flow perspective, we continue to expect approximately $430 million of cash from operations, approximately $400 million of Free Cash Flow, and approximately $450 million of Adjusted Free Cash Flow for the full fiscal year of 2022."
|
In millions |
FY'22 Previous |
FY'22 Guidance |
FY'22 YoY |
Q2'22 Guidance |
|
|
ARR at constant currency (1) |
$1,615 - $1,660 |
$1,625 - $1,660 |
11% - 13% |
$1,540 - $1,550 |
|
|
Cash from Operations (2) |
~$430 |
~$430 |
~17% |
~$143 |
|
|
Free Cash Flow (2), |
~$400 |
~$400 |
~16% |
~$135 |
|
|
Adjusted Free Cash Flow (2) |
~$450 |
~$450 |
~15% |
~$155 |
|
|
Revenue |
$1,850 - $1,975 |
$1,870 - $1,975 |
3% - 9% |
||
|
(1) |
On a constant currency basis, using our FY'22 Plan foreign exchange rates for all periods. Based on foreign exchange rate fluctuations as of the end of Q1'22, we currently expect a $13 million headwind, relative to our constant currency ARR guidance for FY'22, and a $12 million headwind, relative to our constant currency ARR guidance for Q1'22. |
||||
|
(2) |
Free cash flow and adjusted free cash flow guidance are net of expected capex of approximately $30 million in FY'22 and $8 million in Q2'22. FY'22 cash from operations and free cash flow guidance include expected restructuring and acquisition-related payments of approximately $45 million - $50 million, which are excluded from FY'22 adjusted free cash flow guidance. Q2'22 cash from operations and free cash flow guidance include expected restructuring and acquisition-related payments of approximately $20 million, which are excluded from Q2'22 adjusted free cash flow guidance. |
||||
Our FY'22 financial guidance includes the assumptions below.
Q2'22 Guidance and Assumptions:
- Fiscal Q2 constant currency ARR of approximately $1,540 million to $1,550 million. Based on foreign exchange rate fluctuations as of the end of Q1'22, we currently expect a $12 million headwind in Q2'22 compared to constant currency ARR guidance for fiscal Q2'22.
- Fiscal Q2 adjusted free cash flow of approximately $155 million, which excludes expected restructuring and acquisition-related payments of approximately $20 million occurring in Q2.
FY'22 Guidance and Assumptions:
- Low end of constant currency FY'22 ARR guidance raised, reflecting our ARR performance in Q1'22 and forecast for the full year.
- Low end of FY'22 revenue guidance raised, reflecting our ARR and professional services performance in Q1'22, as well as our forecast for the full year.
- We provide full year ARR guidance on a constant currency basis, using our FY'22 Plan foreign exchange rates for all periods. Based on foreign exchange rate fluctuations as of the end of Q1'22, we currently expect a $13 million headwind, relative to our constant currency ARR guidance for FY'22.
- Collections are expected to be higher in 1H FY22 due to invoicing seasonality
- We expect churn to improve by approximately 100 basis points over FY'21.
- At the mid-point of ARR guidance, we expect FY'22 GAAP operating expenses to increase approximately 4-5% and non-GAAP operating expense to increase approximately 2-3% over FY'21.
- 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).
- Fluctuations in the value of our Matterport investment are excluded from both GAAP and non-GAAP guidance as they cannot be predicted.
- Related to the restructuring, we expect:
- 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%.
- Capital expenditures are expected to be approximately $30 million.
- For the remainder of FY'22, we will focus on de-levering. In FY'23 and on a go-forward basis, assuming our Debt/EBITDA is below 3x, we will target to return approximately 50% of our FCF to shareholders via share repurchases.
PTC's Fiscal First Quarter Results Conference Call
The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, January 26, 2022.
To participate in the live conference call, dial (888) 330-2508 or (240) 789-2735 and provide the passcode 7328695, or log in to the webcast, available on PTC's Investor Relations website. A replay will also be available.
