PTC Inc.
CEO : Mr. James E. Heppelmann
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q1 | 1.8% YoY | 53.4% | 64.1% | 2023-02-01 |
Jim Heppelmann says,
Q1 Results
- Organic ARR growth was 14% with Codebeamer then contributing that extra point of inorganic growth.
- Q1 ARR was $1.603 billion, which was above the high end of their range and up more than 15% year-over-year
- Free cash flow was $172 million ahead of their guidance and up 28% year-over-year.
ServiceMax Acquisition
- ServiceMax is used to manage the service processes for high-value long-life cycle products that PTC specializes in.
- ServiceMax will be included in PTC’s guidance going forward and is expected to be highly synergistic and accretive.
- ServiceMax increases PTC’s total addressable market and is expected to accelerate to high-teens growth over time as cross-sell opportunities are realized.
Margin Expansion Program
- PTC management has been driving a margin expansion program, which has created an organizational model for PTC that’s highly efficient and fully sustainable.
- Operating efficiency is expected to expand by approximately 450 basis points in fiscal 2023.
FY 2023 ARR Guidance
- Q1 ARR growth rate was about 15.5%, which was less than the high end of their Q1 ARR guidance range.
- PTC raised their full-year ARR guidance to a narrower 11% to 14% range, with the low end having been raised as the 10% outcome is less plausible.
- PTC also raised their cash flow guidance by $15 million to $575 million, representing 38% growth for the full year.
Geographical ARR Growth
- The largest ARR growth in terms of magnitude was driven by continued strong demand for Creo CAD and Windchill PLM products.
- The Americas saw the strongest ARR growth rate at 16%, followed by Europe at 15% and APAC at 12%.
Kristian Talvitie says,
Q1 2023 Constant Currency ARR Growth Exceeded Guidance
- Q1 2023 constant currency ARR was $1.6 billion, up 15% YoY and exceeded guidance.
- On an organic constant currency basis excluding Codebeamer, ARR was $1.59 billion, up 14% YoY.
Strong Cash Flow Performance in Q1
- Q1 cash flow came in ahead of guidance across all metrics.
- Q1 free cash flow performance was driven by strong execution and solid collections and cost discipline.
Q1 Revenue Increased YoY
- Q1 revenue was $466 million, up 2% YoY and up 9% YoY on a constant currency basis.
- In Q1, recurring revenue grew by $12 million, perpetual license revenue grew by $5 million, and professional services revenue declined by $9 million YoY.
Non-GAAP Operating Margin Expanded
- Non-GAAP operating margin expanded by approximately 100 basis points to 36% in Q1 2023 compared to Q1 2022.
- PTC benefited from optimizing cost structures in fiscal 2022.
Fiscal 2023 ARR Guidance Raised
- Fiscal 2023 constant currency ARR growth guidance is 22% to 25%, with a range of $1.91 billion to $1.96 billion.
- Assuming strong execution and forecast, PTC is well-positioned to achieve its fiscal 2023 ARR guidance.
Q & A sessions,
Impact of SaaS on Pipeline and Competitive Replacement Opportunity
- Deals coming in at SaaS are twice the size as they would have been on-premise.
- Pipeline interest level is high with customers attending LiveWorx to learn about SaaS.
- Competitors are lagging with SaaS or doing it in a hokey way, giving PTC an advantage.
- Companies are likely to switch vendors if their current vendor doesn’t have a good SaaS story.
Q1 2023 Earnings Call: Bookings, Churn, and Guidance
- Bookings were softer than expected, resulting in a 0.5 percentage point slowdown, which is about $8 million on $1.603 billion.
- Churn was shockingly good, with fundamentally strong adoption of PTC’s technology.
- Push and delay, rather than cancellation, is happening due to natural delays and a slowdown in hiring.
- Pipeline looks decent, but the impact of the economy is still a wildcard.
Importance of Model-Based Enterprise and PLM as Must-Have
- Model-Based Enterprise is driving the industry to eliminate the need for 2D drawings and switch to 3D, increasing the need for CAD and PLM software.
- PLM is moving from a nice-to-have to a must-have.
- Companies need a PLM seat for everyone who interacts with product data as they switch to 3D.
Efficient R&D Strategy
- PTC’s R&D strategy prioritizes project selection and execution, making it more efficient than competitors who prioritize body count.
- PTC’s products are winning despite spending less on R&D than competitors.
Wildcard of the Economy and Macro Slowdown
- The impact of the economy is still unknown and could affect PTC’s trend of share gain and seat growth.
- In 2020, PTC had a tough quarter followed by a monster quarter, which could happen again.
No bad stock 