PTC reported financial results for its fourth fiscal quarter and full year ended September 30, 2022.
"In our fourth fiscal quarter, we again delivered strong results. We reported ARR growth of 7%, organic ARR growth of 6%, and organic constant currency growth of 15%. The Codebeamer business, which we acquired in the third quarter, continued to perform well and added an additional point of ARR growth, taking constant currency ARR growth to 16% for the 4th quarter and full year. In fiscal 2022, our cash from operations was $435 million, up 18% year over year, and our free cash flow was $416 million, up 21% year over year. While currency headwinds have impacted our ARR, our solid execution, the timing of our collections, and prudent cost controls have mitigated the impact on cash flow," said James Heppelmann, President and CEO, PTC.
"Our differentiated product portfolio and industry-leading SaaS capabilities align well to the manufacturing industry's push for digital transformation. Despite challenging economic conditions, the strong resiliency of our business due to our subscription model and our strong market position, coupled with strong execution, has allowed PTC to surpass all of our key guidance measures throughout fiscal 2022. We are positioned for continued solid performance in fiscal 2023," concluded Heppelmann.
Fourth Quarter 2022 and Full Year Highlights[1]
Key operating and financial highlights are set forth below. For additional details, please refer to the Q4'22 earnings presentation and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com. Revenue and, as a result, operating margin, operating profit, and earnings per share are impacted by revenue recognition under ASC 606.
- ARR as reported was $1,572 million at the end of Q4'22, up 7% compared to $1,468 million in Q4'21. On a constant currency basis, Q4'22 ARR was $1,706 million, up 16%, compared to $1,468 million in Q4'21, and exceeded guidance. On an organic basis (excluding Codebeamer, which was acquired in Q3'22), Q4'22 ARR was $1,556 million, up 6% compared to $1,468 million in Q4'21. On an organic constant currency basis, Q4'22 ARR was $1,688 million, up 15% compared to $1,468 million in Q4'21. Foreign exchange rate fluctuations had a $134 million negative impact on our Q4'22 reported ARR, compared to our Q4'22 constant currency ARR. ARR at the end of Q4'22 includes a $4 million reduction associated with discontinuing our business operations in Russia in Q2'22.
- Cash flow from operations was $38 million, free cash flow was $29 million, and adjusted free cash flow was $33 million in Q4'22, compared to cash flow from operations of $45 million, free cash flow of $32 million, and adjusted free cash flow of $33 million in Q4'21. For FY'22, cash flow from operations was $435 million, free cash flow was $416 million, and adjusted free cash flow was $468 million, up compared to FY'21 by 18%, 21%, and 20%, respectively. Cash flow results for Q4'22 and FY'22 exceeded guidance. Foreign exchange rate fluctuations had an approximately $30 million negative impact to our FY'22 free cash flow.
- Revenuewas $508 million in Q4'22, up 6% compared to $481 million in Q4'21. On a constant currency basis, revenue was up 12% compared to Q4'21. For FY'22, revenue was $1,933 million, up 7% compared to $1,807 million in FY'21, and in-line with guidance. On a constant currency basis, FY'22 revenue was up 11% compared to FY'21. We do not provide constant currency revenue guidance.
- Operating margin was 29% in Q4'22, compared to 24% in Q4'21. Non-GAAP operating margin in Q4'22 was 40%, compared to 37% in Q4'21. For FY'22, operating margin was 23%, compared to 21% in FY'21. Non-GAAP operating margin was 38% in FY'22, compared to 35% in FY'21.
- Earnings per sharewas $0.90 in Q4'22, compared to $2.46 in Q4'21. Non-GAAP earnings per share in Q4'22 was $1.27, compared to $1.10 in Q4'21. For FY'22, earnings per share was $2.65, compared to $4.03 in FY'21. Non-GAAP earnings per share was $4.58 in FY'22, compared to $3.97 in FY'21. Our Q4'21 and FY'21 GAAP earnings per share benefitted from a $69 million gain on our investment in Matterport, Inc. and a $137 million release of our U.S. valuation allowance.
- Total cash and cash equivalents as of the end of Q4'22 was $272 million. Gross debt was $1.36 billion as of the end of Q4'22. We repaid $75 million on our revolving credit facility in Q4'22. At the end of Q4'21, total cash and equivalents was $327 million and gross debt was $1.45 billion.
- Stock repurchases were $125 million in FY'22.
[1] The definitions of our operating and non-GAAP financial measures and reconciliations of non-GAAP financial measures to comparable GAAP measures are included below and in the reconciliation tables at the end of this press release.
Fiscal 2023 and Q1'23 Guidance
"PTC delivered solid fourth quarter results. With strong bookings performance and significantly improved churn, we beat our ARR and free cash flow guidance for the quarter and the year. Balancing our momentum and forecast with potential macro uncertainties, we are establishing ARR guidance for fiscal 2023 that represents 10% to 14% constant currency growth over fiscal 2022. We expect revenue, which is significantly impacted by both ASC606 revenue recognition and currency fluctuations, to be approximately flat on a year over year basis. Given the resilience of the business model, our consistent execution, operational discipline and the actions we have taken to align our investments with growth expectations, we expect free cash flow of approximately $560M in fiscal 2023," said Kristian Talvitie, EVP and CFO, PTC.
"For Q1'23, we are establishing ARR guidance of 14% to 15% constant currency growth compared to Q1'22, and free cash flow guidance of approximately $165 million," concluded Talvitie.
|
In millions except percentages |
FY'22 Actual |
FY'23 |
FY'23 YoY Growth |
Q1'23 |
|
ARR at Constant Currency(1) |
$1,572 |
$1,730 - $1,790 |
10% - 14% |
$1,580 - $1,600 |
|
Cash from Operations(2) |
$435 |
~$580 |
~33% |
~$170 |
|
Free Cash Flow(2),(3) |
$416 |
~$560 |
~35% |
~$165 |
|
Adjusted Free Cash Flow(2),(3) |
$468 |
~$562 |
~20% |
~$166 |
|
Revenue |
$1,933 |
$1,910 - $1,990 |
(1)% - 3% |
|
|
(1) |
On a constant currency basis, using our FY'23 Plan foreign exchange rates (rates as of September 30, 2022) for FY'22 actual ARR, FY'23 ARR guidance, and Q1'23 ARR guidance; FY'22 actual ARR at constant currency using our FY'22 Plan foreign exchange rates (rates as of September 30, 2021) was $1,706 million. |
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|
(2) |
FY'23 cash from operations and free cash flow guidance include restructuring payments of approximately $1 million and acquisition and transaction-related payments of approximately $1 million, both of which are excluded from FY'23 adjusted free cash flow guidance; Q1'23 cash from operations and free cash flow guidance include expected restructuring payments of approximately $1 million which is excluded from Q1'23 adjusted free cash flow guidance. |
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|
(3) |
Free cash flow and adjusted free cash flow guidance are net of expected capital expenditures of approximately $20 million in FY'23 and $5 million in Q1'23. |
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Our FY'23 and Q1'23 financial guidance includes the assumptions below:
- We provide ARR guidance on a constant currency basis, using our FY'23 Plan foreign exchange rates (rates as of September 30, 2022) for all periods.
- We expect FY'23 organic churn to be ~5.5%.
- For cash flow, due to invoicing seasonality, and consistent with the past 2 years, we expect the majority of our collections to occur in the first half of our fiscal year and for Q4'23 to be our lowest cash flow generation quarter.
- At the mid-point of ARR guidance, we expect FY'23 GAAP operating expenses to decrease approximately 4% to 5% and non-GAAP operating expenses to increase approximately 0% to 1% compared to FY'22.
- FY'23 GAAP P&L results are expected to include the items outlined below, totaling $216 million to $231 million, as well as their related tax effects:
- $160 million to $175 million of stock-based compensation expense
- $56 million of intangible asset amortization expense
- Our FY'23 GAAP and non-GAAP tax rate is expected to be approximately 22%.
- FY'23 capital expenditures are expected to be approximately $20 million.
- Our long-term goal, assuming our Debt/EBITDA ratio is below 3x, is to return approximately 50% of our free cash flow to shareholders via share repurchases, while also taking into consideration the interest rate environment and strategic opportunities.
PTC's Fiscal Fourth Quarter Results Conference Call
The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, November 2, 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.
