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PTC reported financial results for its first fiscal quarter ended December 31, 2022.

"In our first fiscal quarter, we again delivered strong ARR and cash flow results that exceeded our guidance ranges. We reported ARR growth of 11%, organic ARR growth of 10%, and organic constant currency ARR growth of 14%. The Codebeamer™ business, which we acquired in Q3'22, added an additional point of ARR growth, taking constant currency ARR growth to 15%. In Q1, our cash from operations was $181 million, up 31% year over year, and our free cash flow was $172 million, up 28% year over year," said James Heppelmann, President and CEO, PTC.

"Our product portfolio, now increasingly differentiated with the acquisition of ServiceMax, and our industry-leading SaaS capabilities align well to the manufacturing industry's push for digital transformation. Despite uncertain macroeconomic conditions, the resiliency of our business due to our subscription model and our strong market position, coupled with solid execution and prudent financial management, position PTC for continued solid financial performance in fiscal 2023," concluded Heppelmann.

First Quarter 2023 Highlights

Key operating and financial highlights are set forth below. For additional details, please refer to the Q1'23 earnings presentation and financial data tables that have been posted to the Investor Relations section of our website at investor.ptc.com. 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.

Reconciliation of Q1'23 Cash from Operations to Free Cash Flow

Fiscal 2023 and Q2'23 Guidance

"Q1 was a solid start to the year, driven by the resilience of our business model, our consistent execution, operational discipline and the actions we have taken to align our investments with our growth opportunities. While we saw incremental signs of a softening economy in Q1, we believe we have set our financial guidance appropriately, balancing our momentum and forecast with macroeconomic uncertainties. Based on our performance in Q1'23 and forecast for FY'23, we are raising our cash flow guidance and narrowing the ARR guidance range we presented at our investor day in November 2022, which includes the ServiceMax acquisition," said Kristian Talvitie, EVP and CFO, PTC.

Reconciliation of Cash from Operations Guidance to Free Cash Flow Guidance

Our FY'23 and Q2'23 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. Foreign exchange fluctuations during Q1'23 had a favorable impact on our Q1'23 reported ARR, compared to our Q1'23 constant currency ARR. Using foreign exchange rates as of the end of Q1'23 and assuming the midpoint of our constant currency guidance ranges:
  • Q2'23 reported ARR would be higher by approximately $62 million, compared to Q2'23 constant currency ARR
  • FY'23 reported ARR would be higher by approximately $67 million, compared to FY'23 constant currency ARR
• We expect FY'23 organic churn to be ~5.5%, in line with FY'22.
• 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.
• Our GAAP P&L expectations, including our GAAP tax rate, do not include the impact of ServiceMax purchase accounting as the valuation of the acquired assets and liabilities has not been completed. The purchase accounting will include valuing acquired assets and liabilities and is expected to have a material impact on our financial statements.
• Compared to FY'22, at the mid-point of FY'23 ARR guidance, FY'23 GAAP operating expenses, excluding the impact of ServiceMax purchase accounting, are expected to increase approximately 6% to 7%, and FY'23 non-GAAP operating expenses are expected to increase approximately 10% to 11%, primarily due to the acquisition of ServiceMax and foreign exchange rate fluctuations.
• FY'23 GAAP P&L results, excluding the impact of ServiceMax purchase accounting, are expected to include the items below, totaling $253 million to $268 million, as well as their related tax effects:
  • $180 million to $195 million of stock-based compensation expense, with the increase from our previous assumption of $165 million to $180 million primarily due to the acquisition of ServiceMax
  • $57 million of intangible asset amortization expense
  • $16 million of acquisition and transaction-related expense
• Our FY'23 GAAP tax rate, excluding the impact of ServiceMax purchase accounting, is expected to be approximately 22%. Our FY'23 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. Given the current interest rate environment, we expect to prioritize paying down our debt in FY'23 and FY'24.

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, February 1, 2023. 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.

To view the original press release, please click here.

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