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PTC (NASDAQ:PTC) Misses Q4 Revenue Estimates

StockStory - Wed Nov 1, 2023

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Engineering and design software provider PTC (NASDAQ:PTC) missed analysts' expectations in Q4 FY2023, with revenue up 7.62% year on year to $546.6 million. Next quarter's outlook also missed expectations with revenue guided to $535 million at the midpoint, or 4.17% below analysts' estimates. Turning to EPS, PTC made a GAAP profit of $0.38 per share, down from its profit of $0.90 per share in the same quarter last year.

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PTC (PTC) Q4 FY2023 Highlights:

  • Revenue: $546.6 million vs analyst estimates of $559.3 million (2.27% miss)
  • EPS: $0.38 vs analyst expectations of $0.61 (37.6% miss)
  • Revenue Guidance for Q1 2024 is $535 million at the midpoint, below analyst estimates of $558.3 million
  • Management's revenue guidance for the upcoming financial year 2024 is $2.32 billion at the midpoint, missing analyst estimates by 2.14% and implying 10.4% growth (vs 8.5% in FY2023)
  • Free Cash Flow of $44 million, down 73.2% from the previous quarter
  • Gross Margin (GAAP): 78.8%, down from 81.2% in the same quarter last year

"In our fourth fiscal quarter, we again delivered solid ARR and cash flow results. We reported ARR growth of 26%, organic ARR growth of 15%, and organic constant currency ARR growth of 13%. Our ServiceMax® business contributed an additional 11 points of ARR growth, taking constant currency ARR growth to 23%. Our operating cash flow was $50 million in Q4, up 29% year over year, and $611 million in FY'23, up 40%. Our free cash flow was $44 million in Q4, up 52% year over year, and $587 million in FY'23, up 41%," said James Heppelmann, CEO, PTC.

Used to design the Airbus A380 and Boeing 787 Dreamliner commercial airplanes, PTC’s (NASDAQ:PTC) software-as-service platform helps engineers and designers create and test products before manufacturing.

Design Software

The demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games, 3D tours or interactive movies.

Sales Growth

As you can see below, PTC's revenue growth has been unimpressive over the last two years, growing from $480.7 million in Q4 FY2021 to $546.6 million this quarter.

PTC Total Revenue

PTC's quarterly revenue was only up 7.62% year on year, which might disappoint some shareholders. However, we can see that the company's revenue grew by $4.28 million quarter on quarter, accelerating from $161 thousand in Q3 2023.

Next quarter's guidance suggests that PTC is expecting revenue to grow 14.8% year on year to $535 million, improving on the 1.79% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $2.32 billion at the midpoint, growing 10.4% year on year compared to the 8.47% increase in FY2023.

The pandemic fundamentally changed several consumer habits. There is a founder-led company that is massively benefiting from this shift. The business has grown astonishingly fast, with 40%+ free cash flow margins. Its fundamentals are undoubtedly best-in-class. Still, the total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. PTC's free cash flow came in at $44 million in Q4, up 51.8% year on year.

PTC Free Cash Flow

PTC has generated $587 million in free cash flow over the last 12 months, an eye-popping 28.3% of revenue. This robust FCF margin stems from its asset-lite business model, scale advantages, and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a healthy cash balance.

Key Takeaways from PTC's Q4 Results

Sporting a market capitalization of $16.7 billion, more than $288.1 million in cash on hand, and positive free cash flow over the last 12 months, we believe that PTC is attractively positioned to invest in growth.

It was great to see PTC expecting revenue growth to slightly accelerate next year. That really stood out as a positive in these results. On the other hand, its revenue guidance was well below expectations and revenue this quarter also missed Wall Street's estimates. Overall, this was a mixed quarter for PTC. The stock is flat after reporting and currently trades at $138.89 per share.

PTC may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.

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The author has no position in any of the stocks mentioned in this report.

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