Ptc Inc 10-Q for FY2020 Q1

Ptc Inc. (PTC)

10-Q 2020-01-27 For: 2019-12-28

Added on April 10, 2026

About this 10-Q

Ptc Inc filed this 10-Q on January 27, 2020, covering the quarter ended December 28, 2019 (FY2020 Q1).

Headline figures

Quarter ended December 28, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $356.11M; up 6.4% from $334.69M a year earlier
Net income: $35.46M; up 69.0% from net income of $20.99M a year earlier
Diluted EPS: $0.31; up 72.2% from $0.18 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →



Massachusetts		04-2866152
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)



Large accelerated filer	☑	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐
						Emerging growth company	☐



Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	PTC	NASDAQ Global Select Market



		Page Number
Part I—FINANCIAL INFORMATION
Item 1.	Unaudited Condensed Consolidated Financial Statements:
	Consolidated Balance Sheets as of December 28, 2019 and September 30, 2019	1
	Consolidated Statements of Operations for the three months ended December 28, 2019 and December 29, 2018	2
	Consolidated Statements of Comprehensive Income (Loss) for the three months ended December 28, 2019 and December 29, 2018	3
	Consolidated Statements of Cash Flows for the three months ended December 28, 2019 and December 29, 2018	4
	Consolidated Statements of Stockholders' Equity for the three months ended December 28, 2019 and December 29, 2018	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	36


Part II—OTHER INFORMATION
Item 1A.	Risk Factors	38
Item 6.	Exhibits	38
Signature		39



	December 28, 2019			September 30, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	237,017		$	269,579
Short-term marketable securities	29,260			27,891
Accounts receivable, net of allowance for doubtful accounts of $668 and $744 at December 28, 2019 and September 30, 2019, respectively	344,412			372,743
Prepaid expenses	70,323			52,701
Other current assets	58,157			59,707
Total current assets	739,169			782,621
Property and equipment, net	105,171			105,531
Goodwill	1,606,050			1,238,179
Acquired intangible assets, net	266,009			169,949
Long-term marketable securities	28,220			29,544
Deferred tax assets	207,865			198,634
Lease assets, net	165,484			—
Other assets	161,859			140,130
Total assets	$	3,279,827		$	2,664,588
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	42,452		$	42,442
Accrued expenses and other current liabilities	87,156			104,028
Accrued compensation and benefits	86,027			88,769
Accrued income taxes	22,472			17,407
Deferred revenue	359,496			385,509
Short-term lease obligations	33,909			—
Total current liabilities	631,512			638,155
Long-term debt	1,124,345			669,134
Deferred tax liabilities	20,568			41,683
Deferred revenue	8,593			11,123
Long-term lease obligations	191,354			—
Other liabilities	55,638			102,495
Total liabilities	2,032,010			1,462,590
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued	—			—
Common stock, $0.01 par value; 500,000 shares authorized; 115,494 and 114,899 shares issued and outstanding at December 28, 2019 and September 30, 2019, respectively	1,155			1,149
Additional paid-in capital	1,508,030			1,502,949
Accumulated deficit	(157,507		)	(191,390		)
Accumulated other comprehensive loss	(103,861		)	(110,710		)
Total stockholders’ equity	1,247,817			1,201,998
Total liabilities and stockholders’ equity	$	3,279,827		$	2,664,588



☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three months ended
	December 28, 2019			December 29, 2018
Revenue:
License	$	123,430		$	105,322
Support and cloud services	190,936			187,921
Total software revenue	314,366			293,243
Professional services	41,744			41,446
Total revenue	356,110			334,689
Cost of revenue:
Cost of license revenue	13,173			12,563
Cost of support and cloud services revenue	38,928			31,197
Total cost of software revenue	52,101			43,760
Cost of professional services revenue	35,304			33,592
Total cost of revenue	87,405			77,352
Gross margin	268,705			257,337
Operating expenses:
Sales and marketing	107,604			104,218
Research and development	65,308			60,782
General and administrative	44,557			37,864
Amortization of acquired intangible assets	6,777			5,936
Restructuring and other charges, net	14,034			18,493
Total operating expenses	238,280			227,293
Operating income	30,425			30,044
Interest expense	(12,098		)	(10,276		)
Other income (expense), net	704			655
Income before income taxes	19,031			20,423
Benefit from income taxes	(16,424		)	(562		)
Net income	$	35,455		$	20,985
Earnings per share—Basic	$	0.31		$	0.18
Earnings per share—Diluted	$	0.31		$	0.18
Weighted-average shares outstanding—Basic	115,190			118,323
Weighted-average shares outstanding—Diluted	115,691			119,638



	Three months ended December 28, 2019
	Common Stock					Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Shares		Amount			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance as of September 30, 2019	114,899		$	1,149		$	1,502,949		$	(191,390	)	$	(110,710	)	$	1,201,998
ASU 2016-02 (ASC 842) adoption	—		—			—			(1,572		)	—			(1,572		)
Common stock issued for employee stock-based awards	903		9			(9		)	—			—			—
Shares surrendered by employees to pay taxes related to stock-based awards	(308	)	(3		)	(22,846		)	—			—			(22,849		)
Compensation expense from stock-based awards	—		—			27,936			—			—			27,936
Net income	—		—			—			35,455			—			35,455
Unrealized loss on net investment hedges, net of tax	—		—			—			—			(3,343		)	(3,343		)
Foreign currency translation adjustment	—		—			—			—			10,147			10,147
Unrealized loss on available-for-sale securities, net of tax	—		—			—			—			(7		)	(7		)
Change in pension benefits, net of tax	—		—			—			—			52			52
Balance as of December 28, 2019	115,494		$	1,155		$	1,508,030		$	(157,507	)	$	(103,861	)	$	1,247,817



	Three months ended December 29, 2018
	Common Stock					Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Shares		Amount			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance as of September 30, 2018	117,981		$	1,180		$	1,558,403		$	(599,409	)	$	(85,585	)	$	874,589
ASU 2016-16 adoption	—		—			—			72,261			—			72,261
ASC 606 adoption	—		—			—			367,378			—			367,378
Common stock issued for employee stock-based awards	1,056		11			(11		)	—			—			—
Shares surrendered by employees to pay taxes related to stock-based awards	(380	)	(4		)	(33,784		)	—			—			(33,788		)
Common stock issued						(140		)							(140		)
Compensation expense from stock-based awards	—		—			29,407			—			—			29,407
Net income	—		—			—			20,985			—			20,985
Unrealized loss on cash flow hedges, net of tax	—		—			—			—			(385		)	(385		)
Unrealized loss on net investment hedges, net of tax	—		—			—			—			(2,293		)	(2,293		)
Foreign currency translation adjustment	—		—			—			—			(7,569		)	(7,569		)
Unrealized gain on available-for-sale securities, net of tax	—		—			—			—			13			13
Change in pension benefits, net of tax	—		—			—			—			711			711
Balance as of December 29, 2018	118,657		$	1,187		$	1,553,875		$	(138,785	)	$	(95,108	)	$	1,321,169



(in thousands)	December 28, 2019		September 30, 2019
Contract asset	$	20,917	$	21,038
Deferred revenue	$	368,089	$	396,632



(in thousands)	Employee severance and related benefits			Facility closures and related costs			Total
September 30, 2019	$	298		$	30,788		$	31,086
ASC 842 adoption	—			(16,462		)	(16,462		)
Charges to operations, net	13,631			127			13,758
Cash disbursements	(58		)	(873		)	(931		)
Foreign exchange impact	156			(1		)	155
Accrual, December 28, 2019	$	14,027		$	13,579		$	27,606



Restricted stock unit activity for the three months ended December 28, 2019	Number of RSUs (in thousands)		Weighted- Average Grant Date Fair Value Per RSU
Balance of outstanding restricted stock units October 1, 2019	3,232		$	80.52
Granted	1,266		$	76.65
Vested	(903	)	$	67.64
Forfeited or not earned	(477	)	$	85.15
Balance of outstanding restricted stock units December 28, 2019	3,118		$	81.94



(in thousands)	Restricted Stock Units
Grant Period	Performance-based RSUs ⁽¹⁾	Service-based RSUs ⁽²⁾	Total Shareholder Return RSUs ⁽³⁾
First three months of 2020	89	1,088	89


(2)	The service-based RSUs were granted to employees, including our executive officers. Substantially all service-based RSUs will vest in three substantially equal annual installments on or about the anniversary of the date of grant.


ITEM 1.	UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



	Three months ended
	December 28, 2019			December 29, 2018
Cash flows from operating activities:
Net income	$	35,455		$	20,985
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	19,588			20,053
Stock-based compensation	27,936			29,407
Other non-cash items, net	(1,223		)	(5		)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable	34,314			24,025
Accounts payable and accrued expenses	(11,959		)	(9,628		)
Accrued compensation and benefits	(3,563		)	(27,504		)
Deferred revenue	(34,952		)	(21,820		)
Accrued income taxes	(42,702		)	(21,668		)
Other current assets and prepaid expenses	1,680			849
Other noncurrent assets and liabilities	(17,062		)	6,520
Net cash provided by operating activities	7,512			21,214
Cash flows from investing activities:
Additions to property and equipment	(4,707		)	(30,332		)
Purchases of short- and long-term marketable securities	(5,592		)	(6,736		)
Proceeds from maturities of short- and long-term marketable securities	5,499			7,007
Acquisitions of businesses, net of cash acquired	(467,749		)	(69,556		)
Settlement of net investment hedges	(870		)	(1,595		)
Net cash used in investing activities	(473,419		)	(101,212		)
Cash flows from financing activities:
Borrowings under credit facility	455,000			155,000
Repayments of borrowings under credit facility	—			(20,000		)
Proceeds (costs) from issuance of common stock	—			(4,640		)
Credit facility origination costs	(1,005		)	—
Contingent consideration	—			(1,575		)
Payments of withholding taxes in connection with stock-based awards	(22,849		)	(33,788		)
Net cash provided by financing activities	431,146			94,997
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1,991			2,041
Net change in cash, cash equivalents, and restricted cash	(32,770		)	17,040
Cash, cash equivalents, and restricted cash, beginning of period	270,689			261,093
Cash, cash equivalents, and restricted cash, end of period	$	237,919		$	278,133



Average volatility of peer group	28.0	%
Risk free interest rate	1.59	%
Dividend yield	—	%



(in thousands)	December 28, 2019						September 30, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Goodwill (not amortized)					$	1,606,050					$	1,238,179
Intangible assets with finite lives (amortized) ⁽¹⁾:
Purchased software	$	422,922	$	286,307	$	136,615	$	377,359	$	278,144	$	99,215
Capitalized software	22,877		22,877		—		22,877		22,877		—
Customer lists and relationships	419,906		297,574		122,332		355,931		288,828		67,103
Trademarks and trade names	22,597		15,535		7,062		18,891		15,260		3,631
Other	3,946		3,946		—		3,910		3,910		—
	$	892,248	$	626,239	$	266,009	$	778,968	$	609,019	$	169,949
Total goodwill and acquired intangible assets					$	1,872,059					$	1,408,128


(3)	The Total Shareholder Return (TSR) units were granted to our executive officers pursuant to the terms described below.



	Three months ended
Calculation of Basic and Diluted EPS (in thousands, except per share data)	December 28, 2019		December 29, 2018
Net income	$	35,455	$	20,985
Weighted-average shares outstanding—Basic	115,190		118,323
Dilutive effect of restricted stock units	501		1,315
Weighted-average shares outstanding—Diluted	115,691		119,638
Earnings per share—Basic	$	0.31	$	0.18
Earnings per share—Diluted	$	0.31	$	0.18



(in thousands)	Software Products		Professional Services		Total
Balance, October 1, 2019	$	1,196,064	$	42,115	$	1,238,179
Onshape acquisition	363,161		—		363,161
Foreign currency translation adjustment	4,550		160		4,710
Balance, December 28, 2019	$	1,563,775	$	42,275	$	1,606,050


•	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;


•	Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.



(in thousands)	December 28, 2019
	Level 1		Level 2		Level 3		Total
Financial assets:
Cash equivalents	$	83,044	$	—	$	—	$	83,044
Marketable securities:
Corporate notes/bonds	57,480		—		—		57,480
Forward contracts	—		757		—		757
	$	140,524	$	757	$	—	$	141,281
Financial liabilities:
Forward contracts	—		1,694		—		1,694
	$	—	$	1,694	$	—	$	1,694



(in thousands)	December 28, 2019
	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Corporate notes/bonds	57,369		130		(19		)	57,480
	$	57,369	$	130	$	(19	)	$	57,480



(in thousands)	December 28, 2019
	Less than twelve months					Greater than twelve months					Total
	Fair Value		Gross unrealized loss			Fair Value		Gross unrealized loss			Fair Value		Gross unrealized loss
Corporate notes/bonds	$	17,718	$	(13	)	$	12,814	$	(6	)	$	30,532	$	(19	)



Currency Hedged (in thousands)	December 28, 2019		September 30, 2019
Canadian / U.S. Dollar	$	7,962	$	9,408
Euro / U.S. Dollar	273,748		308,282
British Pound / U.S. Dollar	4,344		3,756
Israeli Sheqel / U.S. Dollar	7,824		10,272
Japanese Yen / U.S. Dollar	34,103		37,462
Swiss Franc / U.S. Dollar	8,116		12,001
Swedish Kronor / U.S. Dollar	4,837		20,636
Chinese Yuan offshore / U.S. Dollar	1,238		43,387
Singapore Dollar / U.S. Dollar	44,617		34,585
Chinese Renminbi / U.S. Dollar	14,369		9,079
Russian Ruble / U.S. Dollar	6,360		—
All other	7,837		9,487
Total	$	415,355	$	498,355



Derivatives Not Designated as Hedging Instruments (in thousands)	Location of Gain or (Loss) Recognized in Income	Net realized and unrealized gain or (loss) (excluding the underlying foreign currency exposure being hedged)
		Three months ended
		December 28, 2019		December 29, 2018
Forward Contracts	Other income (expense), net	$	693	$	(987	)



Derivatives Designated as Hedging Instruments	Gain or (Loss) Recognized in OCI						Location of Gain or (Loss) Reclassified from OCI	Gain or (Loss) Reclassified from OCI					Location of Gain or (Loss) Excluded from Effectiveness Testing	Gain or (Loss) Recognized-Excluded Portion
	Three months ended							Three months ended						Three months ended
	December 28, 2019			December 29, 2018				December 28, 2019			December 29, 2018			December 28, 2019		December 29, 2018
Forward Contracts	$	(3,565	)	$	(698	)	Accumulated other comprehensive loss	$	(762	)	$	773	Other income (expense), net	$	1,229	$	486



(in thousands)	Fair Value of Derivatives Designated As Hedging Instruments				Fair Value of Derivatives Not Designated As Hedging Instruments
	December 28, 2019		September 30, 2019		December 28, 2019		September 30, 2019
Derivative assets ⁽¹⁾:
Forward Contracts	$	—	$	1,674	$	757	$	1,390
Derivative liabilities ⁽²⁾:
Forward Contracts	$	663	$	—	$	1,031	$	2,771


(1)	As of December 28, 2019 and September 30, 2019, current derivative assets of $0.8 million and $3.1 million, respectively, are recorded in other current assets in the Consolidated Balance Sheets.



(in thousands)	Gross Amounts Offset in the Consolidated Balance Sheets						Gross Amounts Not Offset in the Consolidated Balance Sheets
As of December 28, 2019	Gross Amount of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received		Net Amount
Forward Contracts	$	757	$	—	$	757	$	(757	)	$	—	$	—



(in thousands)	Three months ended
Revenue	December 28, 2019		December 29, 2018
Americas	$	155,973	$	141,853
Europe	136,521		111,352
Asia-Pacific	63,616		81,484
Total revenue	$	356,110	$	334,689


(1)	Unamortized debt issuance costs related to the credit facility were $3.9 million and $3.1 million as of December 28, 2019 and September 30, 2019, respectively, and were included in other assets in the Consolidated Balance Sheets.


•	a total leverage ratio, defined as consolidated funded indebtedness to consolidated trailing four quarters EBITDA, not to exceed 4.50 to 1.00 as of the last day of any fiscal quarter;


•	a senior secured leverage ratio, defined as senior consolidated total indebtedness (which excludes unsecured indebtedness) to the consolidated trailing four quarters EBITDA, not to exceed 3.00 to 1.00 as of the last day of any fiscal quarter; and


•	an interest coverage ratio, defined as the ratio of consolidated trailing four quarters EBITDA to consolidated trailing four quarters of cash basis interest expense, of not less than 3.00 to 1.00 as of the last day of any fiscal quarter.



(dollar amounts in thousands)	Three months ended
	December 28, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	5,498

Right-of-use assets obtained in exchange for new operating lease liabilities	$	5,380
Right-of-use assets obtained in exchange for new financing lease liabilities	$	1,500
Weighted-average remaining lease term - operating leases	12.4 years
Weighted-average remaining lease term - financing leases	5 years
Weighted-average discount rate - operating leases	5.6		%
Weighted-average discount rate - financing leases	3.0		%