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PTC reported financial results for its second fiscal quarter ended March 31, 2024.

"In our second fiscal quarter, we again delivered solid results. We have a differentiated strategy that leverages our unique product portfolio to enable our customers with their digital transformation journeys. Our consistent ARR and free cash flow growth continues to highlight the value we are bringing to our customers and the stability of our business model," said Neil Barua, CEO, PTC.

"We are updating our mid-term ARR targets to low double-digit ARR growth, which is consistent with our track record of ARR growth over the past 5 years. Importantly, we are reiterating our mid-term cash flow targets as we remain confident in our ability to expand our operating efficiency while continuing to invest in the business to deliver increasing value to our customers," concluded Barua.

Second Quarter 2024 Highlights

Key operating and financial highlights are set forth below. 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 2024 and Q3'24 Guidance and Mid-Term Targets

"Our ARR and free cash flow results in Q2'24 were solid in a challenging selling environment, driven by the resilience of our subscription business model, consistent execution, operational discipline, and the actions we have taken over time to align our investments with market opportunities. We continue to rapidly de-lever, and our debt to EBITDA ratio was 2.3x at the end of Q2'24," said Kristian Talvitie, CFO.

"Reflecting our year-to-date performance and our outlook for the second half, we are narrowing the range of our FY'24 constant currency ARR guidance and maintaining our FY'24 free cash flow guidance. For Q3, the ARR guidance range is 11 to 12 percent growth, with free cash flow of approximately $220 million. It's worth noting that we are updating our FY'24 revenue and EPS guidance consistent with our updated ARR guidance range and also due to the impact of FX. We believe we have set our Q3'24 and FY'24 guidance appropriately," concluded Talvitie.

Reconciliation of Operating Cash Flow Guidance to Free Cash Flow Guidance

Reconciliation of EPS Guidance to Non-GAAP EPS Guidance

Mid-Term Targets

FY'24 financial guidance includes the following assumptions:

• We provide ARR guidance on a constant currency basis, using our FY'24 Plan foreign exchange rates (rates as of September 30, 2023) for all periods. Foreign exchange rate fluctuations during the first half of FY'24 had a $14 million favorable impact on our Q2'24 reported ARR, compared to our Q2'24 constant currency ARR. Using foreign exchange rates as of the end of Q2'24 and assuming the midpoint of our constant currency guidance ranges:
• Q3'24 reported ARR would be higher by approximately $14 million, compared to Q3'24 constant currency ARR guidance; and
• FY'24 reported ARR would be higher by approximately $15 million, compared to FY'24 constant currency ARR guidance.
• We expect churn to remain low.
• For cash flow, due to invoicing and payments seasonality, and consistent with the past 3 years, we expect the majority of our collections to occur in the first half of our fiscal year and for fiscal Q4 to be our lowest cash flow generation quarter.
• Compared to FY'23, at the midpoint of FY'24 ARR guidance, FY'24 GAAP operating expenses are expected to increase approximately 6%, and FY'24 non-GAAP operating expenses are expected to increase approximately 8%, primarily due to investments to drive future growth, the acquisition of ServiceMax, and foreign exchange rate fluctuations.
• FY'24 GAAP P&L results are expected to include the items below, totaling approximately $285 million to $315 million, as well as their related tax effects:
• approximately $200 million to $230 million of stock-based compensation expense,
• approximately $81 million of intangible asset amortization expense,
• approximately $2 million, net, related to acquisition and transaction-related expense and a restructuring credit, and
• approximately $2 million of other non-operating expenses, related to an impairment loss on an available-for-sale debt security.
• Our FY'24 GAAP and non-GAAP tax rates are expected to be approximately 20%.
• Cash tax payments are expected to be approximately $80 million in FY'24.
• Capital expenditures are expected to be approximately $20 million in FY'24.
• Cash interest payments are expected to be approximately $135 million in FY'24.
• 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.
• We expect to prioritize paying down our debt in FY'24.
• We expect gross debt of approximately $1.7 billion at the end of FY'24.
• We expect our fully diluted share count to increase by approximately 1.5 million in FY'24.

PTC's Fiscal Second Quarter Conference Call

The Company will host a conference call to discuss results at 5:00 pm ET on Wednesday, May 1, 2024. To participate in the live conference call, dial (888) 330-2508 or (240) 789-2735, provide the passcode 7328695, and press # 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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