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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

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

For the quarterly period ended March 31, 2022

OR

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

 

For the transition period from_ to_

Commission File Number: 0-18059

 

PTC Inc.

(Exact name of registrant as specified in its charter)

 

 

Massachusetts

 

04-2866152

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

121 Seaport Boulevard, Boston, MA 02210

(Address of principal executive offices, including zip code)

(781) 370-5000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

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

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

There were 116,975,944 shares of our common stock outstanding on May 4, 2022.

 

 

 


 

PTC Inc.

INDEX TO FORM 10-Q

For the Quarter Ended March 31, 2022

 

 

 

 

 

Page

Number

Part I—FINANCIAL INFORMATION

 

 

Item 1.

 

Unaudited Condensed Consolidated Financial Statements:

 

1

 

 

Consolidated Balance Sheets as of March 31, 2022 and September 30, 2021

 

1

 

 

Consolidated Statements of Operations for the three and six months ended March 31, 2022 and March 31, 2021

 

2

 

 

Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2022 and March 31, 2021

 

3

 

 

Consolidated Statements of Cash Flows for the six months ended March 31, 2022 and March 31, 2021

 

4

 

 

Consolidated Statements of Stockholders' Equity for the three and six months ended March 31, 2022 and March 31, 2021

 

5

 

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

38

Item 4.

 

Controls and Procedures

 

38

 

 

 

 

 

 

 

 

 

 

Part II—OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

39

Item 1A.

 

Risk Factors

 

39

Item 2.

 

Unregistered Sales of Equity Securities

 

39

Item 6.

 

Exhibits

 

40

Signature

 

41

 

 

 

 


Table of Contents

 

 

PART I—FINANCIAL INFORMATION

ITEM 1.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PTC Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)

 

 

 

 

March 31,

2022

 

 

September 30,

2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

306,701

 

 

$

326,532

 

Accounts receivable, net of allowance for doubtful accounts of $733 and $304 at March 31, 2022 and September 30, 2021, respectively

 

 

510,196

 

 

 

541,072

 

Prepaid expenses

 

 

88,918

 

 

 

69,991

 

Other current assets

 

 

61,147

 

 

 

135,415

 

Total current assets

 

 

966,962

 

 

 

1,073,010

 

Property and equipment, net

 

 

92,897

 

 

 

100,237

 

Goodwill

 

 

2,186,156

 

 

 

2,191,887

 

Acquired intangible assets, net

 

 

355,360

 

 

 

378,967

 

Deferred tax assets

 

 

299,381

 

 

 

297,789

 

Operating right-of-use lease assets

 

 

149,801

 

 

 

152,337

 

Other assets

 

 

327,966

 

 

 

313,333

 

Total assets

 

$

4,378,523

 

 

$

4,507,560

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

23,741

 

 

$

33,381

 

Accrued expenses and other current liabilities

 

 

102,116

 

 

 

113,067

 

Accrued compensation and benefits

 

 

99,162

 

 

 

117,784

 

Accrued income taxes

 

 

15,054

 

 

 

5,055

 

Deferred revenue

 

 

516,933

 

 

 

482,131

 

Short-term lease obligations

 

 

25,375

 

 

 

27,864

 

Total current liabilities

 

 

782,381

 

 

 

779,282

 

Long-term debt

 

 

1,265,546

 

 

 

1,439,471

 

Deferred tax liabilities

 

 

4,163

 

 

 

4,165

 

Deferred revenue

 

 

17,748

 

 

 

15,546

 

Long-term lease obligations

 

 

178,615

 

 

 

180,935

 

Other liabilities

 

 

46,093

 

 

 

49,693

 

Total liabilities

 

 

2,294,546

 

 

 

2,469,092

 

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; 116,976 and 117,163 shares issued and outstanding at March 31, 2022 and September 30, 2021, respectively

 

 

1,170

 

 

 

1,172

 

Additional paid-in capital

 

 

1,637,631

 

 

 

1,718,504

 

Retained earnings

 

 

550,424

 

 

 

414,656

 

Accumulated other comprehensive loss

 

 

(105,248

)

 

 

(95,864

)

Total stockholders’ equity

 

 

2,083,977

 

 

 

2,038,468

 

Total liabilities and stockholders’ equity

 

$

4,378,523

 

 

$

4,507,560

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

1


Table of Contents

 

PTC Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

Three months ended

 

 

Six months ended

 

 

March 31,

2022

 

 

March 31,

2021

 

 

March 31,

2022

 

 

March 31,

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

License

$

218,375

 

 

$

198,011

 

 

$

387,483

 

 

$

375,186

 

Support and cloud services

 

243,875

 

 

 

223,756

 

 

 

488,360

 

 

 

440,002

 

Total software revenue

 

462,250

 

 

 

421,767

 

 

 

875,843

 

 

 

815,188

 

Professional services

 

42,977

 

 

 

40,018

 

 

 

87,105

 

 

 

75,648

 

Total revenue

 

505,227

 

 

 

461,785

 

 

 

962,948

 

 

 

890,836

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of license revenue

 

11,936

 

 

 

14,160

 

 

 

21,730

 

 

 

27,416

 

Cost of support and cloud services revenue

 

44,768

 

 

 

39,972

 

 

 

90,653

 

 

 

78,314

 

Total cost of software revenue

 

56,704

 

 

 

54,132

 

 

 

112,383

 

 

 

105,730

 

Cost of professional services revenue

 

36,633

 

 

 

35,316

 

 

 

76,072

 

 

 

70,548

 

Total cost of revenue

 

93,337

 

 

 

89,448

 

 

 

188,455

 

 

 

176,278

 

Gross margin

 

411,890

 

 

 

372,337

 

 

 

774,493

 

 

 

714,558

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

116,408

 

 

 

129,178

 

 

 

241,884

 

 

 

253,903

 

Research and development

 

81,935

 

 

 

72,545

 

 

 

162,469

 

 

 

143,380

 

General and administrative

 

47,469

 

 

 

60,805

 

 

 

99,409

 

 

 

110,333

 

Amortization of acquired intangible assets

 

8,450

 

 

 

7,650

 

 

 

16,934

 

 

 

14,197

 

Restructuring and other charges, net

 

(1,562

)

 

 

469

 

 

 

32,429

 

 

 

716

 

Total operating expenses

 

252,700

 

 

 

270,647

 

 

 

553,125

 

 

 

522,529

 

Operating income

 

159,190

 

 

 

101,690

 

 

 

221,368

 

 

 

192,029

 

Interest and debt premium expense

 

(12,239

)

 

 

(12,925

)

 

 

(25,225

)

 

 

(24,444

)

Other expense, net

 

(43,385

)

 

 

(2,408

)

 

 

(37,201

)

 

 

(3,821

)

Income before income taxes

 

103,566

 

 

 

86,357

 

 

 

158,942

 

 

 

163,764

 

Provision(benefit) for income taxes

 

13,887

 

 

 

(22,905

)

 

 

23,174

 

 

 

30,987

 

Net income

$

89,679

 

 

$

109,262

 

 

$

135,768

 

 

$

132,777

 

Earnings per share—Basic

$

0.77

 

 

$

0.94

 

 

$

1.16

 

 

$

1.14

 

Earnings per share—Diluted

$

0.76

 

 

$

0.92

 

 

$

1.15

 

 

$

1.13

 

Weighted-average shares outstanding—Basic

 

117,008

 

 

 

116,777

 

 

 

117,135

 

 

 

116,587

 

Weighted-average shares outstanding—Diluted

 

117,811

 

 

 

118,331

 

 

 

118,162

 

 

 

117,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

2


Table of Contents

 

PTC Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

 

 

Three months ended

 

 

Six months ended

 

 

 

March 31,

2022

 

 

March 31,

2021

 

 

March 31,

2022

 

 

March 31,

2021

 

Net income

 

$

89,679

 

 

$

109,262

 

 

$

135,768

 

 

$

132,777

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedge gain arising during the period, net of tax of $1.2 million and $0 million in the second quarter of 2022 and 2021, respectively, and $2 million and $0 million in the first six months of 2022 and 2021, respectively

 

 

3,697

 

 

 

7,017

 

 

 

6,192

 

 

 

238

 

Foreign currency translation adjustment, net of tax of $0 for each period

 

 

(11,356

)

 

 

(15,851

)

 

 

(17,024

)

 

 

4,124

 

Unrealized loss on marketable securities, net of tax of $0 for each period

 

 

 

 

 

 

 

 

 

 

 

(307

)

Amortization of net actuarial pension loss included in net income, net of tax of $0.1 million and $0.3 million in the second quarter of 2022 and 2021, respectively, and $0.2 million and $0.6 million in the first six months of 2022 and 2021, respectively

 

 

260

 

 

 

744

 

 

 

525

 

 

 

1,476

 

Change in unamortized pension gain (loss) during the period related to changes in foreign currency

 

 

538

 

 

 

1,018

 

 

 

923

 

 

 

(94

)

Other comprehensive income (loss)

 

 

(6,861

)

 

 

(7,072

)

 

 

(9,384

)

 

 

5,437

 

Comprehensive income

 

$

82,818

 

 

$

102,190

 

 

$

126,384

 

 

$

138,214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

3


Table of Contents

 

PTC Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

Six months ended

 

 

March 31,

2022

 

 

March 31,

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

135,768

 

 

$

132,777

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

43,468

 

 

 

40,169

 

Amortization of right-of-use lease assets

 

17,536

 

 

 

18,956

 

Stock-based compensation

 

83,863

 

 

 

90,828

 

Loss on investment

 

34,847

 

 

 

 

Other non-cash items, net

 

(110

)

 

 

(720

)

Changes in operating assets and liabilities, excluding the effects of acquisitions:

 

 

 

 

 

 

 

Accounts receivable

 

12,310

 

 

 

(9,854

)

Accounts payable and accrued expenses

 

(23,388

)

 

 

6,142

 

Accrued compensation and benefits

 

(16,544

)

 

 

(7,038

)

Deferred revenue

 

47,012

 

 

 

52,210

 

Accrued income taxes

 

(6,279

)

 

 

(4,944

)

Other current assets and prepaid expenses

 

(20,569

)

 

 

(17,049

)

Operating lease liabilities

 

(3,360

)

 

 

(9,982

)

Other noncurrent assets and liabilities

 

(24,493

)

 

 

(56,041

)

Net cash provided by operating activities

 

280,061

 

 

 

235,454

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

(5,510

)

 

 

(8,242

)

Purchases of short- and long-term marketable securities

 

 

 

 

(7,562

)

Proceeds from sales of short- and long-term marketable securities

 

 

 

 

56,170

 

Proceeds from maturities of short- and long-term marketable securities

 

 

 

 

9,861

 

Acquisitions of businesses, net of cash acquired

 

 

 

 

(717,198

)

Proceeds from sale of investments

 

42,693

 

 

 

 

Purchases of investments

 

 

 

 

(1,000

)

Purchase of intangible assets

 

(4,454

)

 

 

(550

)

Settlement of net investment hedges

 

11,308

 

 

 

(1,803

)

Net cash provided by (used in) investing activities

 

44,037

 

 

 

(670,324

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Borrowings under credit facility

 

 

 

 

600,000

 

Repayments of borrowings under credit facility

 

(175,000

)

 

 

(98,000

)

Repurchases of common stock

 

(125,000

)

 

 

 

Proceeds from issuance of common stock

 

10,857

 

 

 

10,484

 

Payments of withholding taxes in connection with stock-based awards

 

(50,595

)

 

 

(27,242

)

Payments of principal for financing leases

 

(239

)

 

 

(279

)

Net cash (used in) provided by financing activities

 

(339,977

)

 

 

484,963

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(3,739

)

 

 

543

 

Net change in cash, cash equivalents, and restricted cash

 

(19,618

)

 

 

50,636

 

Cash, cash equivalents, and restricted cash, beginning of period

 

327,046

 

 

 

275,960

 

Cash, cash equivalents, and restricted cash, end of period

$

307,428

 

 

$

326,596

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

4


Table of Contents

 

 

PTC Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2022

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-In

Capital

 

 

Retained Earnings

 

 

Other

Comprehensive

Loss

 

 

Total

Stockholders’

Equity

 

Balance as of December 31, 2021

 

 

116,870

 

 

$

1,169

 

 

$

1,590,285

 

 

$

460,745

 

 

$

(98,387

)

 

$

1,953,812

 

Common stock issued for employee stock-based awards

 

 

51

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Shares surrendered by employees to pay taxes related to stock-based awards

 

 

(12

)

 

 

 

 

 

(1,430

)

 

 

 

 

 

 

 

 

(1,430

)

Common stock issued for employee stock purchase plan

 

 

110

 

 

 

1

 

 

 

10,856

 

 

 

 

 

 

 

 

 

10,857

 

Compensation expense from stock-based awards

 

 

 

 

 

 

 

 

37,921

 

 

 

 

 

 

 

 

 

37,921

 

Repurchases of common stock

 

 

(43

)

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

(1

)

Net income