It has been about a month since the last earnings report for PTC Inc. (PTC). Shares have added about 5.7% 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 Q3 Earnings Beat Estimates
PTC reported fourth-quarter fiscal 2024 non-GAAP earnings per share (EPS) of $1.54, up 28% year over year. The figure beat the Zacks Consensus Estimate by 7.7%.
Quarterly revenues soared 15% year over year to $627 million. The Zacks Consensus Estimate for revenues was pegged at $620.5 million. The top line neared the high end of PTC’s guidance, driven by continued demand for its product lifecycle management (PLM) and computer-aided design (CAD) solutions.
As part of its commitment to enhancing shareholder value, PTC announced a new $2 billion share repurchase authorization extending through Sept. 30, 2027. It plans to buy back nearly $300 million of its stock in fiscal 2025, with purchases commencing in the fiscal first quarter. In addition, PTC intends to retire $500 million in senior notes due in the fiscal second quarter of 2025.
Top Line Details
Recurring revenues of $582.4 million rose 16.4% year over year. Perpetual licenses increased 21% to $9.9 million.
Revenues by License, Support and Services
License revenues (38.2% of total revenues) were $239.5 million, up 29.9% from the year-ago quarter’s figure.
Support and cloud services revenues (56.3%) of $352.9 million increased 8.9%.
Professional services revenues (5.5%) were $34.2 million, down 10.4% year over year.
Revenues by Product Group
PLM and CAD businesses continue to witness healthy momentum. In the fiscal fourth quarter, PLM revenues were $408 million, rising 14% year over year. CAD revenues were $219 million, up 16% from a year ago.
ARR Performance
Annualized recurring revenues (ARR) were $2.255 billion, up 14% year over year. At constant currency, ARR was $2.207 billion, up 12% year over year. The uptick was driven by strong performance across all divisions and regions.
In the fiscal fourth quarter, PLM and CAD ARR were $1,387 million and $868 million, rising 15% and 13% year over year, respectively.
Operating Details
Non-GAAP gross margin came in at 84.4% compared with 81.6% in the prior-year period.
Total operating expenses increased 3.3% year over year to $319.8 million.
Operating income on a non-GAAP basis rose 37.8% year over year to $276.6 million.
Operating margin on a non-GAAP basis increased 740 basis points on a year-over-year basis to 44.1%.
Balance Sheet & Cash Flow
As of Sept. 30, 2024, cash and cash equivalents were $266 million compared with $288 million as of Sept. 30, 2024.
Total debt, net of deferred issuance costs, was $1.748 billion as of Sept. 30, 2024, compared with $1.695 billion as of Sept. 30, 2023.
Cash provided by operating activities was $98 million compared with the prior-year quarter’s figure of $50 million.
The free cash flow was $94 million compared with $44 million in the year-ago quarter.
Guidance
For the first quarter fiscal 2025, PTC estimates revenues in the $540-$570 million band. Non-GAAP EPS is projected in the range of 75 cents to 95 cents. Cash from operations is expected to be $234 million, and free cash flow is forecasted to be $230 million.
Revenues for fiscal 2025 are projected in the range of $2,505-$2,605 billion, indicating a rise of 9-13% year over year. Non-GAAP EPS is estimated in the $5.60-$6.30 band, suggesting a rise of 10-24%.
For fiscal 2025, cash from operations is projected between $850 million and $865 million, indicating a rise of 13% to 15% on a year-over-year basis. The free cash flow is forecasted in the $835-$850 million band, suggesting a 14% to 16% increase.
PTC projects 9% to 10% growth in ARR on a constant currency basis for fiscal 2025.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -42.08% due to these changes.
VGM Scores
Currently, PTC Inc. has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.
Performance of an Industry Player
PTC Inc. is part of the Zacks Computer - Software industry. Over the past month, Microsoft (MSFT), a stock from the same industry, has gained 4%. The company reported its results for the quarter ended September 2024 more than a month ago.
Microsoft reported revenues of $65.59 billion in the last reported quarter, representing a year-over-year change of +16%. EPS of $3.30 for the same period compares with $2.99 a year ago.
For the current quarter, Microsoft is expected to post earnings of $3.14 per share, indicating a change of +7.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.5% over the last 30 days.
Microsoft has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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