Yahoo Finance PTC (NASDAQ:PTC) Reports Sales Below Analyst Estimates In Q2 Earnings
Engineering and design software provider PTC (NASDAQ:PTC) fell short of analysts' expectations in Q2 CY2024, with revenue down 4.4% year on year to $518.6 million. On the other hand, next quarter's revenue guidance of $623 million came in slightly above analysts' estimates. It made a GAAP profit of $0.57 per share, improving from its profit of $0.51 per share in the same quarter last year.
Is now the time to buy PTC? Find out in our full research report.
PTC (PTC) Q2 CY2024 Highlights:
Revenue: $518.6 million vs analyst estimates of $533.8 million (2.8% miss)
Adjusted Operating Income: $164.4 million vs analyst estimates of $179 million (8.2% miss)
EPS: $0.57 vs analyst estimates of $0.50 (13.4% beat)
Revenue Guidance for Q3 CY2024 is $623 million at the midpoint, above analyst estimates of $617.4 million
Gross Margin (GAAP): 78.4%, in line with the same quarter last year
Free Cash Flow of $212.2 million, down 14.1% from the previous quarter
Annual Recurring Revenue: $2.13 billion at quarter end, up 10.2% year on year
Billings: $486.1 million at quarter end, down 7.4% year on year
Market Capitalization: $21.13 billion
"In our third fiscal quarter, we again delivered solid ARR and cash flow, with year-over-year ARR growth in the low double-digits and cash flow growth above 20%. We have a differentiated strategy that leverages our unique product portfolio to help product companies accelerate time to market and manage increasing complexity. It's an exciting time because our products are at the epicenter of driving business transformation at our customers. We are strengthening our ability to scale our business by continuing to align our resources with our five focus areas," said Neil Barua, CEO, PTC.
Used to design the Airbus A380 and Boeing 787 Dreamliner commercial airplanes, PTC’s (NASDAQ:PTC) software-as-service platform helps engineers and designers create and test products before manufacturing.
Design Software
The demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games, 3D tours or interactive movies.
Sales Growth
As you can see below, PTC's revenue growth has been weak over the last three years, growing from $435.7 million in Q3 2021 to $518.6 million this quarter.
This quarter, PTC's revenue was down 4.4% year on year, which might disappointment some shareholders.
Next quarter's guidance suggests that PTC is expecting revenue to grow 14% year on year to $623 million, improving on the 7.6% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 13% over the next 12 months before the earnings results announcement.
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Gross Margin & Pricing Power
Software is eating the world. It's one of our favorite business models because once you develop the product, it usually doesn't cost much to provide it as an ongoing service.
These costs include servers, licenses, and certain personnel, and leverage on them can decide the winners in competitive markets because they determine how much can be invested into new products, sales, and talent.
PTC's robust unit economics are better than the broader software industry, an output of its asset-lite business model and pricing power. They also enable the company to fund large investments in new products and sales during periods of rapid growth to achieve higher operating profits at scale. As you can see below, it averaged an impressive 79.8% gross margin over the last year. Said differently, roughly $79.81 was left to spend on selling, marketing, and R&D for every $100 in revenue.
This quarter, PTC's gross profit margin was 78.4%, which is in line with the same quarter last year. On a wider time horizon, the company's full-year margin has been consistent over the past eight quarters, suggesting its input costs have been stable and it isn't under pressure to lower prices.
Key Takeaways from PTC's Q2 Results
It was encouraging to see PTC slightly beat analysts' revenue guidance expectations. On the other hand, its revenue unfortunately missed analysts' expectations and its billings missed Wall Street's estimates. Overall, this was a mediocre quarter for PTC. The stock remained flat at $177.85 immediately after reporting.
So should you invest in PTC right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
