Transforming the way Companies Create, Operate, and Service Smart, Connected Products. Andrew Miller EVP & Chief Financial Officer

Transcription

1 Transforming the way Companies Create, Operate, and Service Smart, Connected Products Andrew Miller EVP & Chief Financial Officer March 2015

2 Forward-Looking Statement Today s presentation and Q&A session may include forward-looking statements regarding PTC s products or anticipated future operations or financial performance. Any such statements will be based on the current assumptions of PTC s management and are subject to risks and uncertainties that could cause actual events and results to differ materially. Information concerning these risks and uncertainties is contained in PTC s most recent Form 8-K, Form 10-K and Form 10-Qs on file with the SEC. Unless otherwise indicated, all financial measures discussed in today s presentation are non-gaap financial measures. A reconciliation between the non-gaap measures and the comparable GAAP measures is located at the end of this presentation. 2

3 Strong Recurring Software Business with Substantial Growth Opportunity in the Internet of Things (IoT) Transforming how companies create, operate, and service smart, connected products Leadership position in product design and lifecycle management markets 28,000+ customers 60% of Q1 15 revenue recurring Leadership position in high growth IoT market Experts predict 50 billion things connected to the Internet by 2020 PTC target IoT market growing at ~40% CAGR FY 15 targets: $40-$50M revenue; 200 new logos $1.6B $1.4B $1.2B $1.0B $0.8B 48% Free Cash Flow CAGR FY09 FY14 $300M $250M $200M $150M Strong earnings & cash flow momentum 22% non-gaap EPS CAGR Targeting 15% non-gaap EPS CAGR through FY 18 Non-GAAP operating margin improved to 25% in FY 14; target 28%-30% in FY 18 Growing mix of subscription bookings 1 (19% in Q1 15) Commitment to return 40% of free cash flow to shareholders $0.6B $0.4B $0.2B $0.0B FY09 FY10 FY11 FY12 FY13 FY14 Non-GAAP Revenue (LHA) Non-GAAP Net Income (RHA) Free Cash Flow (RHA) $100M $50M $0M 2 Bookings = new ACV x 2 3

4 Capturing the Next Wave of Innovation $579M TTM Sales 249K Active Support Seats ~4% Market Growth Computer-Aided Design (CAD) $517M TTM Sales 1.6M Active PLM Support Seats ~6% Market Growth Product Lifecycle Management (PLM) Targeting $40-50M FY 15 Sales ~200 Accounts end FY 14; targeting 200 new logos FY 15 ~40% Market Growth Internet of Things (IOT) PTC pioneers 3D parametric modeling design software PTC launches web-based collaborative lifecycle management software for the enterprise PTC a leading provider of IoT platform software 4

5 Evolution of Smart, Connected Products Smart, Connected Product Smart Product Product Cloud Database, Application Platform, Rules / Analytics Engine, Smart Product Applications Connectivity One to One, One to Many, Many to Many Enhanced UI Ability to Interact Software Ability to Instruct Sensors Ability to Sense Electronics and Controls Ability to Process Physical Product Electrical Mechanical Mean-Time-to-Repair reduced from 3 hours to minutes 17% of all issues resolved remotely Tripled field service productivity Reduced service costs by $2,000 per incident ~$10 Million saved per year 40% of Push for Help requests resolved remotely Reduced onsite repairs with no parts by 20% 5

6 Smart, Connected Product Technology Stack PRODUCT CLOUD Identity & Security Tools that manage user authentication and system access, as well as secure the product, connectivity, and product cloud layers Smart Product Applications Rules/Analytics Engine Application Platform Product Data Database Network Communication Product Software Software Applications running on remote servers that manage the monitoring, control, optimization, and autonomous operation of product functions The rules, business logic, and big data analytical capabilities that populate the algorithms involved in product operation and reveal new product insights An application development and execution environment enabling the rapid creation of smart, connected business applications using data access, visualization, and run-time tools A big data database system that enables aggregation, normalization, and management of real-time and historical product data COMMUNICATIONS The protocols that enable communications between the product and the cloud PRODUCT An embedded operating system, onboard software applications, an enhanced user interface, and product control components External Information Sources A gateway for information from external sources such as weather, traffic, commodity and energy prices, social media, and geomapping that informs product capabilities Integration with Business Systems Tools that integrate data from smart, connected products with core enterprise business systems such as ERP, CRM, and PLM Product Hardware Embedded sensors, processors, and a connectivity port/antenna that supplement traditional mechanical and electrical components 6

7 PTC s Role in Smart, Connected Product Technology Stack PRODUCT CLOUD Identity & Security Tools that manage user authentication and system access, as well as secure the product, connectivity, and product cloud layers Smart Product Applications Rules/Analytics Engine Application Platform Product Data Database Network Communication Product Software Software Applications running on remote servers that manage the monitoring, control, optimization, and autonomous operation of product functions The rules, business logic, and big data analytical capabilities that populate the algorithms involved in product operation and reveal new product insights An application development and execution environment enabling the rapid creation of smart, connected business applications using data access, visualization, and run-time tools A big data database system that enables aggregation, normalization, and management of real-time and historical product data COMMUNICATION S The protocols that enable communications between the product and the cloud PRODUCT An embedded operating system, onboard software applications, an enhanced user interface, and product control components External Information Sources A gateway for information from external sources such as weather, traffic, commodity and energy prices, social media, and geomapping that informs product capabilities Integration with Business Systems Tools that integrate data from smart, connected products with core enterprise business systems such as ERP, CRM, and PLM Product Hardware Embedded sensors, processors, and a connectivity port/antenna that supplement traditional mechanical and electrical components 7

8 Substantial Growth Rate Projected in IOT Market IDC is projecting that IOT-related IT spend will represent ~1/3 of $2.7T total IT spend in 2020, with IOT software platforms becoming a $46B market 8

9 Many Players in IOT Market PTC Focus 9

10 PTC Emerging as Leader in IoT Platform Space PTC Stands Out In Terms Of Substantial Software Companies That Have Deep Focus on IoT Software Platform Size & Scale Strong IOT Focus 10

11 IoT Ecosystem Large & Rapidly Growing Requirements for IoT Success System Integrator (SI) Implements solutions for end customers that leverage the ThingWorx platform. Acts as influencer in key customers Value Added Reseller (VAR) Sells and supports the ThingWorx platform in a designated territory and/or market Solution Partner Telco Operator Partner IoT Strategic Partners ThingWorx Ready Developer Community Direct Sales Force Builds a Vertical IoT Application on the ThingWorx platform and sells it as a service (aka Powered-by-ThingWorx). Solution Partner apps can also be sold through Telco/OEM partners Channel to market through Telco M2M offerings. Required infrastructure for many Vertical IoT Apps such as: Telematics, Smart Farming, UBI, etc.. Cellular M2M Connections growing from 300M today to 2.2B by 2022 Company that embeds and/or white labels the ThingWorx platform into their own product or solution offering that expands our market opportunity A product (hardware, software, or other IP component) integration and marketing partner relationship, where a product such as a sensor, device, software, or system is pre-integrated into the ThingWorx platform, certified by ThingWorx, and made available through the Marketplace Provide resources to enable software developers create applications for the ThingWorx platform; a key ingredient to building a healthy IoT ecosystem PTC has 55 direct IoT sellers focused on new logo acquisition and over 300 direct strategic sales people that can sell IoT to existing PTC customers 11

12 Smart, Connected Products Will Transform Your Business Harvard Business Review Cover Story November 2014 Co-Authored With Professor Michael Porter Powerful Call To Action For CXO Audiences Record Attendance At HBR Webinar; Executive Event Series Underway Second Article Under Development 12

13 More Momentum: Awards & Recognition People s Choice Winners Best Platform and Tools ThingWorx Must Follow Company ThingWorx Acquisition of the Year Axeda/ThingWorx CEO of the Year Jim Heppelmann, PTC Partner and Ecosystem Builder PTC People s Choice Runner Up IoT Event of the Year LiveWorx Editor s Choice Winners Acquisition of the Year Axeda/ThingWorx Compass Intelligence Awards Enabling Technology of the Year ThingWorx App Development / Enabling Platform of the Year ThingWorx Enabling Company of the Year - Axeda Publicity Creating Many Speaking Invitations 13

14 Adding Subscription Licenses Embracing Subscription Model in FY15 Why? Aligns With Customer Buying Preferences Expands Addressable Market Increases Value of Customer Relationship Why Now? Market Momentum for Subscription IoT and Cloud Services Already Subscription Early Results 19% of Q1 15 license bookings 1 were subscription Anticipate subscription bookings % increasing from 8% FY 14 to 15% FY 15 to 30% by FY 18 Subscription expected to deliver greater NPV over five year period vs. average perpetual license purchase 1 Subscription bookings = new annualized contract value (ACV) x 2; license bookings = subscription bookings + perpetual license revenue 14

15 Solid Q1 15 Despite Fx and Subscription Adoption Q1 non-gaap revenue of $327M, above guidance despite $3M unfavorable impact from higher subscription bookings mix Q1 non-gaap EPS of $0.50 at high end of the range despite $0.02 unfavorable impact from higher subscription bookings mix Normalizing for currency, subscription bookings mix, & one-time R&D tax credit benefit, non-gaap revenue +8% YoY and non-gaap EPS +>20% YoY 24% 18% 12% 6% 0% -6% Q1 Non-GAAP L&SS 1 Revenue -4% Reported YoY 1 L&SS = License & Subscription Solutions 12% Fx & Mix Adjusted YoY 24% 18% 12% 6% 0% -6% 24% 18% 12% 6% 0% -6% Q1 Non-GAAP EPS >20% 1% Reported YoY Fx, Mix & Tax Adjusted YoY Q1 Non-GAAP Total Revenue 8% 4% Reported YoY Fx & Mix Adjusted YoY 15

16 Non-GAAP Operating Margin Expansion to Continue Targeting 28%-30% non-gaap operating margin in FY 18, up from 25% in FY 14 Assumes basis points from higher professional services gross margin and less professional services revenue relative to software Expanding service partner ecosystem helps with mix and pricing discipline Other levers: finish strategic program investments; growth in higher margin services; evolution of what we sell; workforce optimization Assumes basis points from lower opex, primarily sales & marketing efficiency Levers include: enhanced sales segmentation; territory/region optimization; training; pricing/discounting discipline 30% 28%-30% 20% 13% 16% 18% 20% 22% 25% 24%-25% 10% FY'09 FY'10 FY'11 FY'12 FY'13 FY'14 FY'15E FY'16E FY'17E FY'18E Note: assumes subscription solutions bookings ~15% of L&SS bookings in FY 15 and ~30% in FY 18; a higher mix of bookings would lead to lower than expected operating margin but is expected to be positive for PTC s longer-term NPV. 16

17 Long-Term Financial Metrics & Targets Target Non-GAAP EPS CAGR of 15% FY 15-FY 18 Non-GAAP FY'14 FY'15 Outlook 3 FY'18 Target 4 Bookings Subscription Solutions Bookings 1 % L&SS Bookings 1,2 8% ~15% ~30% Revenue L&SS YoY 10% (3%)-5% 12%-15% Support YoY 5% 0% 2%-4% Professional services YoY (2%) (10%) (0%)-(3%) Total revenue growth 5% (3%)-(1%) 6%-10% Operating Margin 25% 24%-25% 28%-30% Shares Outstanding 120M ~117M ~112M Non-GAAP EPS YoY 20% 1%-8% ~15% 1 Subscription Solutions Bookings = New ACV subscription bookings x 2; ACV = total value of the contract (TCV) over the life o f the contract divided by the length of the contract (in days) multiplied by 365. If the term of the contract is less than a year the TCV = ACV. 2 L&SS Bookings = License & Subscription Solutions Bookings = new perpetual license revenue + Subscription Solutions Bookings. 3 Impact of currency fluctuation vs. FY 14 on FY 15 non-gaap revenue is ~$80M and on non-gaap EPS is ~$0.25; FY 15 constant currency revenue growth is 4%-6% and constant currency EPS growth is ~15%. 4 FY 18 total revenue assumes approximately 2% to 4% of acquisition-related growth. 17

18 Healthy Balance Sheet and Cash Return Commitment Commitment to use 40% of free cash flow for stock repurchases Completed $125M accelerated stock repurchase in Q1 15; authorized to buy back $475M in additional shares $261M cash, $606M debt; $456M available to borrow based on financial covenants in our credit facility (as of Jan. 3, 2015) ($ in millions) FY'09 FY'10 FY'11 FY'12 FY'13 FY'14 Net Cash Provided by Operating $70 $157 $79 $218 $225 $305 Activities Capital Expenditures ($30) ($27) ($28) ($31) ($29) ($25) Free Cash Flow $40 $130 $51 $187 $195 $279 Repurchases of Common Stock ($5) ($60) ($55) ($35) ($75) ($225) Weighted Average Shares Outstanding Free cash flow return % 12% 46% 108% 19% 38% 81% ~ ~ FY'09 FY'10 FY'11 FY'12 FY'13 FY'14 FY'15E FY'16E FY'17E FY'18E Shares Outstanding (in millions) 18

19 A Time Of Change & Opportunity Our Vision For PTC In 2018 Acknowledged IOT leader Reinvented CAD, PLM, ALM, and SLM Satisfied and Committed Customers Strong Growth in a Subscription Model 30% Non-GAAP Operating Margins Substantial Increase in Shareholder Value

20 NASDAQ: PTC Questions? Contact Investor Relations: investor.ptc.com or tel. (781)

21 Non-GAAP Financial Measures and Reconciliations (Unaudited) FY'09 FY'10 FY'11 FY'12 FY'13 FY'14 Q1'14 Q1'15 (in millions, except per share data) GAAP revenue $ $ 1,010.0 $ 1,166.9 $ 1,255.7 $ 1,293.5 $ 1,357.0 $ $ Fair value adjustment of acquired deferred revenue Non-GAAP revenue ,010.0 $ 1,169.6 $ 1,258.2 $ 1,296.6 $ 1,358.2 $ $ GAAP gross margin $ $ $ $ $ $ $ $ Fair value adjustment of acquired deferred revenue Fair value adjustment to deferred costs (0.1) - (0.1) Stock-based compensation Amort of acquired intangible assets in cost of revenue Non-GAAP gross margin $ $ $ $ $ $ 1,013.0 $ $ GAAP operating income $ 19.3 $ 74.8 $ $ $ $ $ 54.9 $ 37.6 Fair value adjustment of acquired deferred revenue Fair value adjustment to deferred costs (0.2) - (0.1) Stock-based compensation Amort of acquired intangible assets in cost of revenue Amortization of acquired intangible assets Charges included in general and administrative expenses In-Process research & development Restructuring (credit) charges (0.3) Non-GAAP operating income $ $ $ $ $ $ $ 82.3 $ 69.8 GAAP net income $ 31.5 $ 24.4 $ 85.4 $ (35.4) $ $ $ 39.7 $ 30.3 Fair value adjustment of acquired deferred revenue Fair value adjustment to deferred costs (0.2) - (0.1) Stock-based compensation Amort of acquired intangible assets in cost of revenue Amortization of acquired intangible assets Charges included in general and administrative expenses In-process research & development Restructuring charges (0.3) Non-operating one-time gain (5.7) Gain on litigation resolution - (9.0) Income tax adjustments (39.6) 21.3 (27.8) 98.8 (77.8) (43.5) (6.9) (3.5) Non-GAAP net income $ 93.6 $ $ $ $ $ $ 60.2 $

22 Non-GAAP Financial Measures and Reconciliations (Unaudited) Continued FY'09 FY'10 FY'11 FY'12 FY'13 FY'14 Q1'14 Q1'15 GAAP diluted earnings per share $ 0.27 $ 0.20 $ 0.71 $ (0.30) $ 1.19 $ 1.34 $ 0.33 $ 0.26 Fair value adjustment of acquired deferred revenue Fair value adjustment to deferred costs Stock-based compensation Amortization of acquired intangibles Charges included in general and administrative expenses Restructuring charges Non-operating one-time gain - (0.08) (0.05) Income tax adjustments (0.34) 0.18 (0.23) 0.82 (0.64) (0.36) (0.06) (0.03) Non-GAAP diluted earnings per share $ 0.80 $ 1.00 $ 1.26 $ 1.51 $ 1.81 $ 2.17 $ 0.50 $ 0.50 GAAP operating margin 2.1% 7.4% 10.0% 10.2% 9.8% 14.5% 16.9% 11.6% Fair value adjustment of acquired deferred revenue 0.0% 0.0% 0.2% 0.2% 0.2% 0.1% 0.0% 0.4% Fair value adjustment to deferred costs 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Stock-based compensation 4.6% 4.8% 3.9% 4.1% 3.8% 3.8% 3.9% 3.5% Amortization of acquired intangibles 3.8% 3.4% 2.9% 2.9% 3.5% 3.7% 3.8% 4.4% Charges included in general and administrative expenses 0.0% 0.0% 0.7% 0.3% 0.8% 1.0% 0.4% 1.8% Restructuring charges 2.4% 0.0% 0.0% 2.0% 4.0% 2.1% 0.3% -0.1% Non-GAAP operating margin 12.9% 15.6% 17.7% 19.6% 22.1% 25.1% 25.3% 21.4% 22

23 Non-GAAP Financial Measures and Reconciliations (Unaudited) Continued FY'13 FY'14 (in millions) GAAP to Non-GAAP revenue by line of business: GAAP L&SS revenue $ $ Fair value adjustment of acquired deferred L&SS revenue Non-GAAP L&SS revenue $ $ GAAP support revenue $ $ Fair value adjustment of acquired deferred support revenue Non-GAAP support revenue $ $ GAAP professional services revenue $ $ Fair value adjustment of acquired deferred professional services revenue Non-GAAP professional services revenue $ $

24 Non-GAAP Financial Measures and Reconciliations (Unaudited) Our FY 15 non-gaap operating profit target excludes $4 million of adjustments related to the fair value of acquired deferred revenue, $55 million of stock-based compensation expense, $55 million of intangible asset amortization expense and $13 million of other charges, net (primarily acquisition-related and pension plan termination related expense). The FY 15 GAAP operating profit target is approximately $200 million. FY 15 GAAP and non-gaap operating profit excludes settlement losses related to the termination of our U.S. pension plan estimated to be approximately $65 million. Our FY 18 financial targets including non-gaap operating margin, non-gaap EPS and non-gaap EPS CAGR through FY 18, and FY 18 year-over-year growth rates for non- GAAP L&SS revenue, non-gaap support revenue and non-gaap professional services revenue exclude the following items, if any: adjustments related to the fair value of acquired deferred revenue, stock-based compensation expense, intangible asset amortization expense, acquisition-related expense, pension plan termination related expense, restructuring charges, certain identified non-operating gains and losses and the related tax effects of the preceding items and discrete tax items. 24