PTC reported financial results for the first quarter of fiscal 2016 ended January 2, 2016.
Q1 Fiscal 2016 Overview
First quarter FY'16 revenue was $291 million GAAP; $292 million non-GAAP. GAAP net loss was $25.5 million or $0.22 per share driven by a $37 million restructuring charge; non-GAAP net income was $57 million or $0.50 per share.
As compared to the first quarter of FY'15, currency negatively impacted revenue by approximately $21 million and negatively impacted non-GAAP EPS by approximately $0.06 per share.
James Heppelmann, President and CEO, said, "PTC delivered a solid Q1, reflecting continued momentum in our subscription program and IoT business. Subscription bookings represented 28% of total bookings, ACV was higher than guidance, and more than 80% of our software revenue was recurring during the quarter. Despite the higher mix of subscriptions in the quarter, we delivered non-GAAP EPS above our guidance range, reflecting a discrete tax benefit in the quarter and continued expense discipline."
Heppelmann added, "In IoT, new logo additions were strong, with 65 this quarter compared to 42 in Q1'15. Additionally, we closed the acquisitions of Vuforia in Q1 and Kepware in Q2, further extending our IoT offerings with Vuforia's augmented reality platform and accelerating our entry into the factory setting with Kepware's access to industrial automation data."
Operational Overview
For additional details, please refer to the prepared remarks and financial data tables that have been posted to the Investor Relations section of our website at ptc.com. Information about our bookings and other reporting measures is provided on page 4.
For the quarter, subscription bookings were approximately 28% of total bookings, above our guidance assumption of 18% and up from 19% a year ago. Based upon our model, this higher mix of subscription than guidance in the first quarter, while positive long-term, reduced perpetual license revenue by approximately $7 million and reduced non-GAAP EPS by approximately $0.05 as compared to our guidance. As a rule of thumb, our model indicates that, on an annual basis, every 1% change in subscription mix will impact annual revenue by $3 million, and annual non-GAAP EPS by $0.02.
License and subscription bookings were $69 million; at the high-end of guidance of $62 million to $70 million.
Total ACV was $11 million; ahead of guidance of $6 million.
On a year over year, constant currency basis, non-GAAP software revenue was down $4 million or 2%. Our model indicates that the higher mix of subscription than last year lowered software revenue by approximately $7 million.
Annualized recurring revenue (ARR) was approximately $754 million at the end of the first quarter of fiscal 2016, which increased 6% on a constant currency basis compared to the first quarter of fiscal 2015.
GAAP operating expenses were approximately $226 million; non-GAAP operating expenses were approximately $159 million.
Q1 FY'16 GAAP operating margin was (5%) and non-GAAP operating margin was 21%. Q1 FY'15 GAAP operating margin was 12% and non-GAAP operating margin was 21%. We believe the higher mix of subscription in Q1 FY'16 lowered operating margin by approximately 180 basis points as compared to guidance and by approximately 165 basis points as compared to Q1 FY'15. In addition, currency negatively impacted operating margin by 40 basis points as compared to Q1 FY'15.
We recorded an income tax provision of $4 million GAAP, or ($0.04) per share, and a non-GAAP income tax benefit of $1 million, or $0.01 per share, for the quarter. The non-GAAP income tax benefit is due to discrete items in the quarter and the forecasted geographic mix of non-GAAP income for the year.
Cash provided by operations for Q1 FY'16 was $61 million. Excluding $17 million paid in connection with the restructuring announced in October 2015, cash provided by operations for Q1 FY'16 was $78 million. We did not purchase any shares in Q1 FY'16, as our share repurchases are planned for the second half of FY'16. Q1 FY'16 DSO was 52 days.
We ended the quarter with total cash and cash equivalents of $297 million and total debt of $718 million. In conjunction with the Kepware acquisition, we borrowed $120 million in Q2'16.
Workforce Realignment
Reflecting a realignment of resources toward higher growth opportunities and our commitment to operating margin improvement, in October 2015, management announced that it planned to repurpose or eliminate approximately 8% of worldwide positions and to consolidate select facilities. These actions are expected to result in a restructuring charge of $40 to $50 million; of which $37 million was recorded in Q1 FY'16, with the remainder expected to be recorded predominantly in the second and third quarters of FY'16. Substantially all of the charges are attributable to termination benefits, most of which will be paid in FY'16.
