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PTC Inc. (PTC) Up 0.1% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for PTC Inc. (PTC - Free Report) . Shares have added about 0.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is PTC Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
PTC’s Q1 Earnings Miss Estimates, Revenues Increase Y/Y
PTC reported first-quarter fiscal 2022 non-GAAP earnings of 95 cents per share, down 2.1% on a year-over-year basis. The bottom line missed the Zacks Consensus Estimate by 5%.
Revenues came in at $457.7 million, up 6.7% year over year (up 8% at constant currency or cc) driven by strength across Core and Growth product groups and contribution from Arena. The top line, however, missed the Zacks Consensus Estimate by 1.5%.
The company witnessed robust demand for products across its product portfolio and all regions, thereby driving digital transformation. It is working toward bolstering its software as a service (SaaS) solution with high growth rates of cloud-native Onshape and Arena products, noted management. PLM and CAD businesses continue to outpace market growth.
The company has two new business units, namely, Digital Thread and Velocity. Digital Thread includes products like Creo computer-aided design or CAD, Windchill PLM, Thingworx IoT and Vuforia AR. The Velocity unit comprises products like Onshape CAD and Arena PLM.
Top Line in Detail
Recurring revenues of $405.1 million grew 5.2% year over year. Perpetual license inched up 0.1% to $8.5 million.
Revenues by License, Support and Services
License revenues (37% of total revenues) were $169.1 million, down 4.6% from the year-ago quarter’s figure.
Support and cloud services revenues (53.4%) of $244.5 million increased 13.1% year over year.
Professional services revenues (9.6%) were $44.1 million, up 23.9% year over year.
Revenues by Product Group
Revenues from Digital Thread came in at $439 million, up 2.8% year over year. Revenues from the Velocity segment totaled $18 million, up 88.9%.
Revenues from Digital Thread - Core came in at $310 million, up 0.3% from the prior-year quarter’s levels.
Revenues from Digital Thread - Growth came in at $71 million, increasing 7.6%.
Revenues from Digital Thread - FSG (Focused Solutions Group) came in at $58 million, increasing 11.5% from the prior-quarter year.
ARR Performance
Annualized recurring revenues (ARR) were $1.496 billion, up 12% year over year (up 16% at cc). The uptick was driven by strong performance of Core and Growth divisions along with contribution from Arena Solutions.
ARR from Digital Thread - Core came in at $1.033 billion, up 6.8% year over year (up 11% at cc). Growth was driven by strength in PLM and CAD solutions. Velocity segment ARR came in at $78 million, up from $10 million (up 688% at cc).
ARR from Digital Thread - Growth came in at $197 million, up 11.3% year over year (up 14% at cc). The upside can be attributed to strength in Onshape and Arena Solutions as well as IoT offerings.
ARR from Digital Thread - FSG totaled $189 million, up 3.8% year over year (up 6% at cc) driven by systems and software engineering solutions.
Operating Details
Non-GAAP gross margin contracted 40 basis points (bps) on a year-over-year basis to 81.9%.
Total operating expenses increased 19.3% year over year to $300.4 million, mainly due to research and development, restructuring and other charges along with general and administrative costs.
Operating income on a non-GAAP basis improved 3.1% year over year to $158.1 million.
Operating margin on a non-GAAP basis shrunk 130 bps on a year-over-year basis to 34.5%.
Balance Sheet & Cash Flow
As of Dec 31, 2021, cash, cash equivalents and marketable securities were $296.1 million compared with $326.5 million as of Sep 30, 2021.
Total debt, net of deferred issuance costs, was $1.4 billion as of Dec 31, 2021, relatively flat sequentially.
Cash provided by operating activities came in at $138 million compared with the prior quarter’s figure of $45 million.
Free cash flow was $134 million compared with $32 million reported in the previous quarter.
In the quarter under review, the company repurchased shares worth $120 million.
Fiscal 2022 Guidance
PTC continues to expect the overall macroeconomic backdrop to be consistent in the first half of 2022 and start moderating in the second half of fiscal 2022.
Fiscal 2022 revenues are projected between $1.87 billion and $1.975 billion, which indicates a rise of 3-9% year over year.
ARR is expected to be $1.625-$1.66 billion, which indicates a rise of 11-13% year over year.
Non-GAAP operating expenses are anticipated to increase in the range of 2-3%. The company expects costs to increase owing to hiring and higher investments in SaaS business.
Cash from operations is projected to be $430 million, indicating an increase of 17% on a year-over-year basis. Free cash flow is forecast to be $400 million, which suggests 16% growth.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, PTC Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PTC Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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PTC Inc. (PTC) Up 0.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for PTC Inc. (PTC - Free Report) . Shares have added about 0.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is PTC Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
PTC’s Q1 Earnings Miss Estimates, Revenues Increase Y/Y
PTC reported first-quarter fiscal 2022 non-GAAP earnings of 95 cents per share, down 2.1% on a year-over-year basis. The bottom line missed the Zacks Consensus Estimate by 5%.
Revenues came in at $457.7 million, up 6.7% year over year (up 8% at constant currency or cc) driven by strength across Core and Growth product groups and contribution from Arena. The top line, however, missed the Zacks Consensus Estimate by 1.5%.
The company witnessed robust demand for products across its product portfolio and all regions, thereby driving digital transformation. It is working toward bolstering its software as a service (SaaS) solution with high growth rates of cloud-native Onshape and Arena products, noted management. PLM and CAD businesses continue to outpace market growth.
The company has two new business units, namely, Digital Thread and Velocity. Digital Thread includes products like Creo computer-aided design or CAD, Windchill PLM, Thingworx IoT and Vuforia AR. The Velocity unit comprises products like Onshape CAD and Arena PLM.
Top Line in Detail
Recurring revenues of $405.1 million grew 5.2% year over year. Perpetual license inched up 0.1% to $8.5 million.
Revenues by License, Support and Services
License revenues (37% of total revenues) were $169.1 million, down 4.6% from the year-ago quarter’s figure.
Support and cloud services revenues (53.4%) of $244.5 million increased 13.1% year over year.
Professional services revenues (9.6%) were $44.1 million, up 23.9% year over year.
Revenues by Product Group
Revenues from Digital Thread came in at $439 million, up 2.8% year over year. Revenues from the Velocity segment totaled $18 million, up 88.9%.
Revenues from Digital Thread - Core came in at $310 million, up 0.3% from the prior-year quarter’s levels.
Revenues from Digital Thread - Growth came in at $71 million, increasing 7.6%.
Revenues from Digital Thread - FSG (Focused Solutions Group) came in at $58 million, increasing 11.5% from the prior-quarter year.
ARR Performance
Annualized recurring revenues (ARR) were $1.496 billion, up 12% year over year (up 16% at cc). The uptick was driven by strong performance of Core and Growth divisions along with contribution from Arena Solutions.
ARR from Digital Thread - Core came in at $1.033 billion, up 6.8% year over year (up 11% at cc). Growth was driven by strength in PLM and CAD solutions. Velocity segment ARR came in at $78 million, up from $10 million (up 688% at cc).
ARR from Digital Thread - Growth came in at $197 million, up 11.3% year over year (up 14% at cc). The upside can be attributed to strength in Onshape and Arena Solutions as well as IoT offerings.
ARR from Digital Thread - FSG totaled $189 million, up 3.8% year over year (up 6% at cc) driven by systems and software engineering solutions.
Operating Details
Non-GAAP gross margin contracted 40 basis points (bps) on a year-over-year basis to 81.9%.
Total operating expenses increased 19.3% year over year to $300.4 million, mainly due to research and development, restructuring and other charges along with general and administrative costs.
Operating income on a non-GAAP basis improved 3.1% year over year to $158.1 million.
Operating margin on a non-GAAP basis shrunk 130 bps on a year-over-year basis to 34.5%.
Balance Sheet & Cash Flow
As of Dec 31, 2021, cash, cash equivalents and marketable securities were $296.1 million compared with $326.5 million as of Sep 30, 2021.
Total debt, net of deferred issuance costs, was $1.4 billion as of Dec 31, 2021, relatively flat sequentially.
Cash provided by operating activities came in at $138 million compared with the prior quarter’s figure of $45 million.
Free cash flow was $134 million compared with $32 million reported in the previous quarter.
In the quarter under review, the company repurchased shares worth $120 million.
Fiscal 2022 Guidance
PTC continues to expect the overall macroeconomic backdrop to be consistent in the first half of 2022 and start moderating in the second half of fiscal 2022.
Fiscal 2022 revenues are projected between $1.87 billion and $1.975 billion, which indicates a rise of 3-9% year over year.
ARR is expected to be $1.625-$1.66 billion, which indicates a rise of 11-13% year over year.
Non-GAAP operating expenses are anticipated to increase in the range of 2-3%. The company expects costs to increase owing to hiring and higher investments in SaaS business.
Cash from operations is projected to be $430 million, indicating an increase of 17% on a year-over-year basis. Free cash flow is forecast to be $400 million, which suggests 16% growth.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, PTC Inc. has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PTC Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.