10-Q 1 ptc-20240331.htm 10-Q 10-Q
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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, 2024

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 119,744,260 shares of our common stock outstanding on May 1, 2024.

 



 

PTC Inc.

INDEX TO FORM 10-Q

For the Quarter Ended March 31, 2024

 

Page

Number

Part I—FINANCIAL INFORMATION

 

Item 1.

Unaudited Condensed Consolidated Financial Statements:

1

Consolidated Balance Sheets as of March 31, 2024 and September 30, 2023

1

Consolidated Statements of Operations for the three and six months ended March 31, 2024 and March 31, 2023

2

Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2024 and March 31, 2023

3

Consolidated Statements of Cash Flows for the six months ended March 31, 2024 and March 31, 2023

4

Consolidated Statements of Stockholders' Equity for the three and six months ended March 31, 2024 and March 31, 2023

5

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

29

Item 4.

Controls and Procedures

29

 

Part II—OTHER INFORMATION

 

Item 1A.

Risk Factors

30

Item 5.

 

Other Information

 

30

Item 6.

Exhibits

31

Signature

32

 

 

 

 


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,
2024

 

 

September 30,
2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

248,971

 

 

$

288,103

 

Accounts receivable, net of allowance for doubtful accounts of $1,269 and $429 at March 31, 2024 and September 30, 2023, respectively

 

 

705,493

 

 

 

811,398

 

Prepaid expenses

 

 

137,393

 

 

 

96,016

 

Other current assets

 

 

60,951

 

 

 

81,849

 

Total current assets

 

 

1,152,808

 

 

 

1,277,366

 

Property and equipment, net

 

 

81,811

 

 

 

88,391

 

Goodwill

 

 

3,446,373

 

 

 

3,358,511

 

Acquired intangible assets, net

 

 

931,471

 

 

 

941,249

 

Deferred tax assets

 

 

109,204

 

 

 

123,319

 

Operating right-of-use lease assets

 

 

135,262

 

 

 

143,028

 

Other assets

 

 

348,334

 

 

 

356,978

 

Total assets

 

$

6,205,263

 

 

$

6,288,842

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

19,637

 

 

$

43,480

 

Accrued expenses and other current liabilities

 

 

110,353

 

 

 

132,841

 

Accrued compensation and benefits

 

 

119,326

 

 

 

160,431

 

Accrued income taxes

 

 

19,348

 

 

 

14,919

 

Current portion of long-term debt

 

 

514,677

 

 

 

9,375

 

Deferred acquisition payments

 

 

 

 

 

620,040

 

Deferred revenue

 

 

708,839

 

 

 

665,362

 

Short-term lease obligations

 

 

22,836

 

 

 

24,737

 

Total current liabilities

 

 

1,515,016

 

 

 

1,671,185

 

Long-term debt

 

 

1,491,064

 

 

 

1,686,410

 

Deferred tax liabilities

 

 

37,568

 

 

 

29,508

 

Long-term deferred revenue

 

 

15,732

 

 

 

16,188

 

Long-term lease obligations

 

 

160,953

 

 

 

168,455

 

Other liabilities

 

 

41,798

 

 

 

39,806

 

Total liabilities

 

 

3,262,131

 

 

 

3,611,552

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value; 5,000 shares authorized; none issued

 

 

 

 

 

 

Common stock, $0.01 par value; 500,000 shares authorized; 119,717 and 118,846 shares issued and outstanding at March 31, 2024 and September 30, 2023, respectively

 

 

1,197

 

 

 

1,188

 

Additional paid-in capital

 

 

1,901,109

 

 

 

1,820,905

 

Retained earnings

 

 

1,154,109

 

 

 

973,277

 

Accumulated other comprehensive loss

 

 

(113,283

)

 

 

(118,080

)

Total stockholders’ equity

 

 

2,943,132

 

 

 

2,677,290

 

Total liabilities and stockholders’ equity

 

$

6,205,263

 

 

$

6,288,842

 

 

 

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

1


PTC Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

 

 

Three months ended

 

 

Six months ended

 

 

 

March 31,
2024

 

 

March 31,
2023

 

 

March 31,
2024

 

 

March 31,
2023

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

License

 

$

234,321

 

 

$

196,993

 

 

$

418,319

 

 

$

369,691

 

Support and cloud services

 

 

336,446

 

 

 

304,071

 

 

 

666,915

 

 

 

561,727

 

Total software revenue

 

 

570,767

 

 

 

501,064

 

 

 

1,085,234

 

 

 

931,418

 

Professional services

 

 

32,305

 

 

 

41,117

 

 

 

68,052

 

 

 

76,673

 

Total revenue

 

 

603,072

 

 

 

542,181

 

 

 

1,153,286

 

 

 

1,008,091

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of license revenue

 

 

10,602

 

 

 

17,039

 

 

 

20,931

 

 

 

29,792

 

Cost of support and cloud services revenue

 

 

67,414

 

 

 

59,137

 

 

 

134,437

 

 

 

109,362

 

Total cost of software revenue

 

 

78,016

 

 

 

76,176

 

 

 

155,368

 

 

 

139,154

 

Cost of professional services revenue

 

 

32,039

 

 

 

37,330

 

 

 

64,707

 

 

 

70,142

 

Total cost of revenue

 

 

110,055

 

 

 

113,506

 

 

 

220,075

 

 

 

209,296

 

Gross margin

 

 

493,017

 

 

 

428,675

 

 

 

933,211

 

 

 

798,795

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

134,521

 

 

 

129,207

 

 

 

271,445

 

 

 

247,590

 

Research and development

 

 

106,998

 

 

 

100,349

 

 

 

212,781

 

 

 

188,526

 

General and administrative

 

 

61,526

 

 

 

65,923

 

 

 

130,732

 

 

 

116,894

 

Amortization of acquired intangible assets

 

 

10,424

 

 

 

10,656

 

 

 

20,787

 

 

 

18,682

 

Restructuring and other charges (credits), net

 

 

(7

)

 

 

1

 

 

 

(802

)

 

 

(337

)

Total operating expenses

 

 

313,462

 

 

 

306,136

 

 

 

634,943

 

 

 

571,355

 

Operating income

 

 

179,555

 

 

 

122,539

 

 

 

298,268

 

 

 

227,440

 

Interest and debt premium expense

 

 

(31,586

)

 

 

(41,525

)

 

 

(66,920

)

 

 

(57,883

)

Other income (expense), net

 

 

(2,224

)

 

 

55

 

 

 

(4

)

 

 

(2,064

)

Income before income taxes

 

 

145,745

 

 

 

81,069

 

 

 

231,344

 

 

 

167,493

 

Provision for income taxes

 

 

31,300

 

 

 

17,565

 

 

 

50,512

 

 

 

28,954

 

Net income

 

$

114,445

 

 

$

63,504

 

 

$

180,832

 

 

$

138,539

 

Earnings per share—Basic

 

$

0.96

 

 

$

0.54

 

 

$

1.52

 

 

$

1.17

 

Earnings per share—Diluted

 

$

0.95

 

 

$

0.53

 

 

$

1.50

 

 

$

1.17

 

Weighted-average shares outstanding—Basic

 

 

119,587

 

 

 

118,260

 

 

 

119,354

 

 

 

118,037

 

Weighted-average shares outstanding—Diluted

 

 

120,712

 

 

 

119,041

 

 

 

120,480

 

 

 

118,912

 

 

 

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

 

2


PTC Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

 

 

Three months ended

 

 

Six months ended

 

 

 

March 31,
2024

 

 

March 31,
2023

 

 

March 31,
2024

 

 

March 31,
2023

 

Net income

 

$

114,445

 

 

$

63,504

 

 

$

180,832

 

 

$

138,539

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Hedge gain (loss) arising during the period, net of tax of $(2.1) million and $0.7 million in the second quarter of 2024 and 2023, respectively, and $1.7 million and $4.5 million in the first six months of 2024 and 2023, respectively

 

 

6,432

 

 

 

(1,999

)

 

 

(5,079

)

 

 

(13,484

)

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

 

 

(24,792

)

 

 

8,747

 

 

 

9,882

 

 

 

68,776

 

Change in defined benefit pension items, net of tax of $0 for each period

 

 

216

 

 

 

(24

)

 

 

(6

)

 

 

(332

)

Other comprehensive income (loss)

 

 

(18,144

)

 

 

6,724

 

 

 

4,797

 

 

 

54,960

 

Comprehensive income

 

$

96,301

 

 

$

70,228

 

 

$

185,629

 

 

$

193,499

 

 

 

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

3


PTC Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Six months ended

 

 

 

March 31,
2024

 

 

March 31,
2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

180,832

 

 

$

138,539

 

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

 

 

 

 

 

 

Depreciation and amortization

 

 

54,144

 

 

 

49,037

 

Amortization of right-of-use lease assets

 

 

15,459

 

 

 

16,564

 

Stock-based compensation

 

 

113,204

 

 

 

93,750

 

Other non-cash items, net

 

 

649

 

 

 

(2,089

)

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

 

 

 

 

 

 

Accounts receivable

 

 

107,507

 

 

 

86,478

 

Accounts payable and accrued expenses

 

 

(48,345

)

 

 

11,110

 

Accrued compensation and benefits

 

 

(16,451

)

 

 

(18,468

)

Deferred revenue

 

 

40,971

 

 

 

36,092

 

Accrued income taxes

 

 

18,087

 

 

 

(12,169

)

Other current assets and prepaid expenses

 

 

(21,745

)

 

 

(786

)

Operating lease liabilities

 

 

(10,293

)

 

 

4,985

 

Other noncurrent assets and liabilities

 

 

4,052

 

 

 

(11,174

)

Net cash provided by operating activities

 

 

438,071

 

 

 

391,869

 

Cash flows from investing activities:

 

 

 

 

 

 

Additions to property and equipment

 

 

(8,202

)

 

 

(12,950

)

Acquisitions of businesses, net of cash acquired

 

 

(93,457

)

 

 

(828,271

)

Purchases of investments

 

 

 

 

 

(5,823

)

Settlement of net investment hedges

 

 

(2,224

)

 

 

(12,544

)

Divestitures of businesses and assets, net

 

 

 

 

 

(154

)

Net cash used in investing activities

 

 

(103,883

)

 

 

(859,742

)

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings under credit facility

 

 

739,845

 

 

 

1,130,000

 

Repayments of borrowings under credit facility and acquired debt

 

 

(435,671

)

 

 

(564,000

)

Proceeds from issuance of common stock

 

 

12,709

 

 

 

10,592

 

Payments of withholding taxes in connection with stock-based awards

 

 

(71,184

)

 

 

(56,022

)

Payments of principal for financing leases

 

 

 

 

 

(217

)

Credit facility origination costs

 

 

 

 

 

(13,355

)

Payment of deferred acquisition consideration

 

 

(620,040

)

 

 

 

Net cash provided by (used in) financing activities

 

 

(374,341

)

 

 

506,998

 

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

 

 

829

 

 

 

9,181

 

Net change in cash, cash equivalents, and restricted cash

 

 

(39,324

)

 

 

48,306

 

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

 

 

288,798

 

 

 

272,888

 

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

 

$

249,474

 

 

$

321,194

 

Supplemental disclosure of non-cash financing and investing activities:

 

 

 

 

 

 

Operating right-of-use assets obtained in exchange for operating lease liabilities

 

$

2,847

 

 

$

23,596

 

 

 

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

4


PTC Inc.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)

 

 

 

Three months ended March 31, 2024

 

 

 

Common Stock

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In
Capital

 

 

Retained Earnings

 

 

Other
Comprehensive
Loss

 

 

Total
Stockholders’
Equity

 

Balance as of December 31, 2023

 

 

119,445

 

 

$

1,194

 

 

$

1,860,934

 

 

$

1,039,664

 

 

$

(95,139

)

 

$

2,806,653

 

Common stock issued for employee stock-based awards

 

 

266

 

 

 

3

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

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

 

 

(96

)

 

 

(1

)

 

 

(17,537

)

 

 

 

 

 

 

 

 

(17,538

)

Common stock issued for employee stock purchase plan

 

 

102

 

 

 

1

 

 

 

12,708

 

 

 

 

 

 

 

 

 

12,709

 

Compensation expense from stock-based awards

 

 

 

 

 

 

 

 

45,007

 

 

 

 

 

 

 

 

 

45,007

 

Net income

 

 

 

 

 

 

 

 

 

 

 

114,445

 

 

 

 

 

 

114,445

 

Gain on net investment hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,432

 

 

 

6,432

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24,792

)

 

 

(24,792

)

Change in defined benefit pension items, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

216

 

 

 

216

 

Balance as of March 31, 2024

 

 

119,717

 

 

$

1,197

 

 

$

1,901,109

 

 

$

1,154,109

 

 

$

(113,283

)

 

$

2,943,132

 

 

 

 

Six months ended March 31, 2024

 

 

 

Common Stock

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In
Capital

 

 

Retained Earnings

 

 

Other
Comprehensive
Loss

 

 

Total
Stockholders’
Equity

 

Balance as of September 30, 2023

 

 

118,846

 

 

$

1,188

 

 

$

1,820,905

 

 

$

973,277

 

 

$

(118,080

)

 

$

2,677,290

 

Common stock issued for employee stock-based awards

 

 

1,216

 

 

 

13

 

 

 

(13

)

 

 

 

 

 

 

 

 

 

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

 

 

(447

)

 

 

(5

)

 

 

(71,869

)

 

 

 

 

 

 

 

 

(71,874

)

Common stock issued for employee stock purchase plan

 

 

102

 

 

 

1

 

 

 

12,708

 

 

 

 

 

 

 

 

 

12,709

 

Compensation expense from stock-based awards

 

 

 

 

 

 

 

 

139,378

 

 

 

 

 

 

 

 

 

139,378

 

Net income

 

 

 

 

 

 

 

 

 

 

 

180,832

 

 

 

 

 

 

180,832

 

Loss on net investment hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,079

)

 

 

(5,079

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,882

 

 

 

9,882

 

Change in defined benefit pension items, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6

)

 

 

(6

)

Balance as of March 31, 2024

 

 

119,717

 

 

$

1,197

 

 

$

1,901,109

 

 

$

1,154,109

 

 

$

(113,283

)

 

$

2,943,132

 

 

5


 

 

 

Three months ended March 31, 2023

 

 

 

Common Stock

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In
Capital

 

 

Retained Earnings

 

 

Other
Comprehensive
Loss

 

 

Total
Stockholders’
Equity

 

Balance as of December 31, 2022

 

 

118,161

 

 

$

1,182

 

 

$

1,701,817

 

 

$

802,772

 

 

$

(105,222

)

 

$

2,400,549

 

Common stock issued for employee stock-based awards

 

 

94

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

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

 

 

(23

)

 

 

(1

)

 

 

(3,146

)

 

 

 

 

 

 

 

 

(3,147

)

Common stock issued for employee stock purchase plan

 

 

102

 

 

 

 

 

 

10,592

 

 

 

 

 

 

 

 

 

10,592

 

Compensation expense from stock-based awards

 

 

 

 

 

 

 

 

40,312

 

 

 

 

 

 

 

 

 

40,312

 

Net income

 

 

 

 

 

 

 

 

 

 

 

63,504

 

 

 

 

 

 

63,504

 

Loss on net investment hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,999

)

 

 

(1,999

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,747

 

 

 

8,747

 

Change in defined benefit pension items, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(24

)

 

 

(24

)

Balance as of March 31, 2023

 

 

118,334

 

 

$

1,182

 

 

$

1,749,574

 

 

$

866,276

 

 

$

(98,498

)

 

$

2,518,534

 

 

 

 

Six months ended March 31, 2023

 

 

 

Common Stock

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-In
Capital

 

 

Retained Earnings

 

 

Other
Comprehensive
Loss

 

 

Total
Stockholders’
Equity

 

Balance as of September 30, 2022