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PTC's Earnings and Revenues Breeze Past Estimates in Q1

Zacks Equity Research

PTC Inc. PTC reported first-quarter fiscal 2020 non-GAAP earnings of 57 cents per share, up 1.8% on a year-over-year basis, beating the Zacks Consensus Estimate by 26.7%.

Revenues came in at $356.1 million, up 6.4% year over year, surpassing the Zacks Consensus Estimate of $346 million. Solid AR and IoT bookings and synergies from Onshape acquisition drove growth.

Top-Line in Detail

Recurring revenues of $305.4 million improved 21.4% year over year. Perpetual license of almost $9 million declined 78.5% from the year-ago quarter’s figure, owing to “end of perpetual license sales on Jan 1, 2019.”

Revenues by License, Support and Services

License revenues (34.7% of total revenues) were $123.4 million, up 17.2% over the year-ago quarter’s figure.

Support and cloud services revenues (53.6%) of $190.9 million, improved 1.6% year over year.

Professional services revenues (11.7%) of $41.7 million, increasing 0.7% year over year.

Revenues by Product Group

Revenues from Core Product Group, which includes computer-aided design (CAD) & Product Lifecycle Management (PLM) offerings, came in at $830 million, up 9% (up 10% at cc).

Revenues from Growth Product Group (which includes IoT, AR & Onshape) came in at $48 million, up 36% year over year (37% on a cc basis).

Revenues from Focused Solutions Group (FSG) came in at $45 million, down 6% year over year (5% on a cc basis).

ARR Performance

Annualized recurring revenues (ARR) were $1.16 billion, up 11% year over year, driven by strength in Core and Growth product groups.

ARR from Core Product Group (CAD & PLM) came in at $830 million, up 9% (up 10% at cc). Growth was driven by strength in PLM ad robust performance across China and Europe.

ARR from Growth Product Group (IoT, AR & Onshape) came in at $151 million, up 35% year over year, (36% on a cc basis). Year-over-year growth can be attributed to improvement in AR and IoT bookings and strength across Europe and APAC. Synergies from Onshape acquisition aided performance.

ARR from FSG came in at $178 million, up 1% year over year on a cc basis.

PTC Inc. Price, Consensus and EPS Surprise

PTC Inc. Price, Consensus and EPS Surprise

PTC Inc. price-consensus-eps-surprise-chart | PTC Inc. Quote

Operating Details

Non-GAAP gross margin contracted 160 basis points (bps) on a year-over-year basis to 78.2%.

Non-GAAP operating expenses came in at $185 million. GAAP operating expenses increased 4.8% year over year to $238.3 million. This can be attributed to higher research & development expenses, and general & administrative expenses, which increased 7.4% and 17.7%, respectively.  Moreover, Sales & marketing expenses surged 3.2% from the year-ago quarter.

Operating income on a non-GAAP basis increased 2.1% year over year to $93.1 million.

Operating margin on a non-GAAP basis contracted 110 bps to 26.1%.

Balance Sheet & Cash Flow

As of Dec 28, 2019, cash, cash equivalents and marketable securities were $294.5 million, compared with prior quarter’s figure of $327 million.

Total debt, net of deferred issuance costs, was $1.124 billion, up from prior quarter’s $669.1 million.

Cash provided by operating activities came in at $7.5 million, compared with prior-quarter figure of $55.2 million.

Promising Guidance

Management anticipates the first-quarter momentum to continue, and thereby raised fiscal 2020 revenue guidance.

Fiscal 2020 revenues are now projected between $1.445 billion and $1.525 billion, compared with the earlier guided range of $1.41-$1.51 billion. The mid-point of the guided range, $1.485 billion is above the current Zacks Consensus Estimate for the period of $1.45.

Further, non-GAAP earnings are now expected between $2.15 and $2.65 per share, compared with the prior range of $1.95-$2.60 per share. The mid-point of the guided range, $2.40, is above the current Zacks Consensus Estimate for the period of $2.16.

ARR is expected to be $1.270-$1.295 billion, up 14-16% year over year.

Adjusted free cash flow is projected to be $260-$280 million. Non-GAAP operating margin is expected to be 26-29%.

Zacks Rank & Stocks to Consider

PTC currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are SYNNEX Corporation SNX, Keysight Technologies KEYS and Garmin GRMN, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for SYNNEX, Keysight and Garmin is currently pegged at 10.37%, 10% and 7.35%, respectively.

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