PTC reported first quarter revenue of $335M and net income of $21M with big boost from IoT.
Although a lot of tech stocks have taken a hit lately, PTC has fared relatively well. Although it hit a high of over $100 in the past year, it now seems to be at a relatively stable level of approximately $80 and not as volatile as some of its competition.
Stock price aside, though, PTC reported some pretty good financial results for its Q1 2019 with revenues of $335 million and $21 million profit using generally accepted accounting principles (GAAP) –sort of a standard for compiling and disclosing financial statements. Both revenue and profit surprised financial analysts who had forecast lower estimates.
So, what exactly prompted this good news on financial results?
Jim Heppelmann, PTC’s president and CEO said, “Our financial performance in the first quarter was solid, with revenue, operating margin and EPS results exceeding our expectations. We continued to make important strides against our major strategic initiatives during the quarter, most notably, we successfully completed our transition to a subscription business model.”
“As of now with the small exception of Kepware, we only sell subscription software across our mainstream product lines and geographies. This was a critical milestone for us and the one that we achieved relatively quickly as compared to similar transitions done by our software peers,” he continued.
“While we have ongoing work to do to further optimize our subscription business model, I trust you would agree that we can officially declare victory on the very large and strategic transition program.”
Technology is one thing but attributing a big part of financial success to a business model is something else, and something the competition has certainly toyed with and tweaked to maximize their return from customers. In any case, subscription license revenue is far outpacing perpetual license revenue and will certainly continue this course in the future.
Some of the highlights regarding the positive financial results include the following areas:
- License and subscription bookings: Q1 2019 license and subscription bookings were $101 million, consistent with last year on a constant currency basis.
- Software revenue: Q1 2019 software revenue was $299 million, an increase of 13% year over year.
- Recurring Software revenue: Q1 2019 software recurring revenue was $258 million, an increase of 11% year over year.
These, of course are good results, but the most impressive increase came from the area where PTC, through acquisitions and organic internal growth, has bet the farm: IoT. IoT software revenue for Q1 2019 was $34 million, up 30% year over year or 31% on a constant currency basis, driven by 35% constant currency growth in recurring IoT software revenue. Things being what they are, this IoT growth trend should continue for quite some time, probably even accelerating as a percentage of total revenue generation.
As a side note to the Q1 financial announcement, PTC announced that Andrew Miller, executive vice president and chief financial officer, plans to retire this year.
“Andy joined us 4 years ago and has played an integral role in PTC’s transformation. His most notable contribution has been leading PTC’s transition to a subscription business model, which was completed this past quarter,” said president and CEO, Jim Heppelmann. “Andy will continue as CFO until his successor is in place, through the balance of the fiscal year if needed.”
There’s that subscription business model again…
With IoT and subscriptions at the forefront, PTC looks as if it’s on a positive financial track going forward.