Slide 1: Q4'22 and FY'22 Financial Results
Q4’22 AND FY’22 FINANCIAL RESULTS Investor Relations November 2, 2022
Slide 2: Forward Looking Statements
2 FORWARD LOOKING STATEMENTS This presentation includes forward looking statements regarding PTC’s future financial performance, strategic outlook and expectations, anticipated future operations, and expected effects of strategic investments and initiatives. Because such statements deal with future
Slide 3: Q4'22 and FY'22 Highlights
Q4’22 AND FY’22 HIGHLIGHTS JIM HEPPELMANN – PRESIDENT & CEO
Slide 4: Strong Q4'22 and FY'22 Financial Results
4 STRONG Q4’22 AND FY’22 FINANCIAL RESULTS Top Line Bottom Line ARR at the end of Q4’22 Cash Flow in FY’22 $1.57 billion as reported, up 7% YoY; $1.56 billion $435 million cash from operations, up 18% YoY organic (excluding Codebeamer) up 6% $1.71 billion constant currency, up 16% YoY, $416 million
Slide 5: Delivering on Our Margin Opportunity
5 DELIVERING ON OUR MARGIN OPPORTUNITY Portfolio rebalancing drives further Adoption of SaaS best margin expansion opportunities in FY’23 practices produced FY’22 expansion and beyond PTC Overall PTC Startups Evolution of organization model to align to SaaS Rebalancing of resources across portfolio
Slide 6: Strong FY'22 Bookings Growth
6 STRONG FY’22 BOOKINGS GROWTH Driven by demand for digital transformation and SaaS Top Line Bookings Record bookings in Q4’22: low-single digit organic constant currency bookings growth YoY, versus strong Q4’21, consistent with expectations Strong FY’22: mid-teens % organic constant currency bookin
Slide 7: Strong ARR Results Across Geographic Regions
7 STRONG ARR RESULTS ACROSS GEOGRAPHIC REGIONS Americas Q4’22 compared to Q4’21 Strong double-digit growth across all product groups Absolute growth primarily driven by Digital Thread – Core 17% growth 0% growth Mid-20s% growth in both Digital Thread – Growth and Velocity 17% growth CC 16% growth CC
Slide 8: Digital Thread ARR Results
8 DIGITAL THREAD ARR RESULTS 1 In millions (constant currency) Core Growth FSG 4% YoY 12% YoY 10% YoY 14% YoY CC 19% YoY CC 19% YoY CC $1,157 $1,013 $230 $225 $193 $190 Q4'21 Q4'22 Q4'21 Q4'22 Q4'21 Q4'22 CAD and PLM both grew in the ARR growth near “2 handle” Organic constant currency growth double
Slide 9: Windchill+ Customers Include
9 WINDCHILL+ CUSTOMERS INCLUDE:
Slide 10: Velocity ARR Results
10 VELOCITY ARR RESULTS 1 In millions (constant currency) ▪ Cloud-native, pure-SaaS, CAD/PLM 29% YoY market leader 29% YoY CC $94 ▪ Mid-30s % Onshape CAD ARR growth driven by upsell/expansions and $73 improved churn rate ▪ Mid-20s % Arena PLM ARR growth driven by upsell/expansions, new logos, and im
Slide 11: Resilience of Our Business
11 RESILIENCE OF OUR BUSINESS PTC is positioned for a strong FY’23 Constant Currency Bookings Churn Organic ARR YoY YoY Free Growth Scenario Scenario Cash Flow1 FY’22 Actual 15% +mid-teens% 195bps better $416 million 14% ~5% Flattish ~$560 million Most FY’23 Plausible Guidance 12% Flattish ~100bps w
Slide 12: New Reporting Structure
NEW REPORTING STRUCTURE
Slide 13: New Reporting Structure
13 NEW REPORTING STRUCTURE 1 New structure aligns to our strategy, product offerings, and industry segments Historical categories Going forward FY’22 ARR FY’23 ARR FY’22 ARR FY’23 ARR growth guidance growth guidance Digital Thread – Core 14% 10% - 14% CAD (product data authoring) 11% 8% - 10% • Creo
Slide 14: PTC's Full PLM Suite
14 From 2017 PTC’S FULL PLM SUITE Windchill is core PLM for Industrial companies Arena is PLM for outsourced manufacturing FlexPLM is core PLM for Retail companies Codebeamer/ALM is PLM for software components ThingWorx is closed-loop PLM Servigistics/SLM is PLM for Service departments From 2012 PTC
Slide 15: PTC Is the Category Leader in PLM
15 PTC IS THE CATEGORY LEADER IN PLM Our category leadership has been masked by fragmentation of PTC’s PLM position in external reporting PLM software market share using comparable definitions of PLM1 $1,137M Total PLM Revenue inclusive of Professional services $981M PLM $950M PLM ARR Software in FY
Slide 16: Upcoming Investor Events
16 UPCOMING INVESTOR EVENTS November 17, 2022 May 15 – 16, 2023 FY’23 Investor Day (virtual) LiveWorx (in-person in Boston) Focused on financial plan for Focused on strategy and customers FY’23 and mid-term Large global event with customers, partners, investors, and employees Dedicated investor trac
Slide 17: Wrap Up
17 WRAP UP STRONG POSITONED TO STRONG PROFITABILITY DRIVE STRONG PORTFOLIO EXECUTION EXPANSION GROWTH AND STRATEGY Portfolio of products is Mid-teens % organic FY’22 operating margin Business model, market unique and compelling constant currency of 23%; non-GAAP position, and execution growth for bo
Slide 18: Financial Review and Guidance
FINANCIAL REVIEW AND GUIDANCE KRISTIAN TALVITIE – EVP & CFO
Slide 19: FY'22 Results vs Prior Year
19 FY’22 RESULTS VS PRIOR YEAR In millions Constant Currency ARR Cash Flow1 Revenue 16% 18% 20% 7% 21% $468 $1,706 $435 $416 $1,807 $1,933 1% $369 $344 $391 Codebeamer $1,468 FY'21 FY'22 FY'21 FY'22 FY'21 FY'22 ARR growth of 7%; organic growth Cash flow performance reflects Revenue growth of 7%, 11%
Slide 20: Balance Sheet and Share Repurchases
20 BALANCE SHEET AND SHARE REPURCHASES Strong balance sheet as of September 30, 2022 Cash and cash equivalents of $272 million Gross borrowings of $1.359 billion with an aggregate interest rate of 3.9% $1.0 billion of senior notes with an aggregate interest rate of 3.8% $359 million drawn on revolvi
Slide 21: FX in FY'22: Impact to ARR
21 FX IN FY’22: IMPACT TO ARR In millions FY'21 FY'22 ARR by Product Group (Constant Currency) Qtr Ended Qtr Ended Using FX rates as of September 30, 2021 31-Dec 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 30-Jun 30-Sep Digital Thread - Core $ 940 $ 956 $ 976 $ 1,013 $ 1,041 $ 1,079 $ 1,110 $ 1,157 Digital T
Slide 22: FX in FY'23: Constant Currency ARR History Recasted
22 FX IN FY’23: CONSTANT CURRENCY ARR HISTORY RECASTED In millions FY'21 FY'22 ARR by Product Group (Constant Currency) Qtr Ended Qtr Ended Using FX rates as of September 30, 2022 31-Dec 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 30-Jun 30-Sep CAD (Product data authoring) $ 573 $ 581 $ 594 $ 615 $ 632 $ 648
Slide 23: FX Dynamics: ARR Sensitivity to EUR/USD and USD/Yen
23 FX DYNAMICS: ARR SENSITIVITY TO EUR/USD AND USD/YEN In millions End of Q4'22 ARR base $1,572 Estimated impact of $0.10 change in EUR/USD rate $38 Estimated impact of 10 Yen change in USD/JPY rate $7 As of the end of Q4’22 52% of our ARR is transacted in USD 24% of our ARR is transacted in EUR 6%
Slide 24: Bridging Guidance for FX
24 BRIDGING GUIDANCE FOR FX FY’22 actuals and FY’23 and Q1’23 guidance at 9/30/21 FX rates for illustrative purposes FY’23 FY’23 YoY Growth Q1’23 In millions except percentages FY’22 Actual Guidance Guidance Guidance ARR at Constant Currency $1,706 $1,875 - $1,945 10% - 14% $1,715 - $1,735 Revenue a
Slide 25: FY'23 and Q1'23 Guidance
25 FY’23 AND Q1’23 GUIDANCE FY’23 FY’23 YoY Growth Q1’23 In millions except percentages FY’22 Actual Guidance Guidance Guidance ARR at Constant Currency 1 $1,572 $1,730 - $1,790 10% - 14% $1,580 - $1,600 Cash from Operations $435 ~$580 ~33% ~$170 Free Cash Flow $416 ~$560 ~35% ~$165 Adjusted Free Ca
Slide 26: Comparison: ARR vs. Revenue (Part 1)
26 COMPARISON: ARR VS. REVENUE (PART 1) Primary variables impacting revenue Type of Term Type of software Software Length Upfront recognition % Upfront Total Term length Recog. Contract Contract size % Value FX rates Hypothetical example with 10 contracts
Slide 27: Comparison: ARR vs. Revenue (Part 1)
27 COMPARISON: ARR VS. REVENUE (PART 1) Primary variables impacting revenue Type of Term Type of software Software Length Upfront recognition % Upfront Total Term length Recog. Contract Contract size % Value FX rates Key takeaways For SaaS/Cloud and On-Prem support, revenue recognition is ratable Te
Slide 28: Comparison: ARR vs. Revenue (Part 1)
28 COMPARISON: ARR VS. REVENUE (PART 1) Primary variables impacting revenue Type of Term Type of software Software Length Upfront recognition % Upfront Total Term length Recog. Contract Contract size % Value FX rates Key takeaways For On-Prem subscription, a portion of the TCV of the contract is upf
Slide 29: Comparison: ARR vs. Revenue (Part 1)
29 COMPARISON: ARR VS. REVENUE (PART 1) Primary variables impacting revenue Type of Term Type of software Software Length Upfront recognition % Upfront Total Term length Recog. Contract Contract size % Value FX rates Key takeaways For On-Prem subscription, a portion of the TCV of the contract is upf
Slide 30: Comparison: ARR vs. Revenue (Part 2)
30 COMPARISON: ARR VS. REVENUE (PART 2) $15,000 This hypothetical model assumes +69% No growth, price increases, or churn +26% +50% No changing software type (e.g. support +44% to subscription, or subscription to SaaS) +25% +5% $10,000 All contracts the same size ($1,000) -5% -21% No changing contra
Slide 31: Comparison: ARR vs. Revenue (Summary)
31 COMPARISON: ARR VS. REVENUE (SUMMARY) $1 ARR → $1 Revenue Free Cash Flow = f(ARR) Revenue is noise when assessing 1 PTC’s business performance 1 Technical definition: irregular fluctuations that accompany a transmitted signal but are not part of it and tend to obscure it
Slide 32: FY'23 and Q1'23 Guidance
32 FY’23 AND Q1’23 GUIDANCE FY’23 FY’23 YoY Growth Q1’23 In millions except percentages FY’22 Actual Guidance Guidance Guidance ARR at Constant Currency 1 $1,572 $1,730 - $1,790 10% - 14% $1,580 - $1,600 Cash from Operations $435 ~$580 ~33% ~$170 Free Cash Flow $416 ~$560 ~35% ~$165 Adjusted Free Ca
Slide 33: FY'23 Illustrative Constant Currency ARR Model
33 FY’23 ILLUSTRATIVE CONSTANT CURRENCY ARR MODEL What does PTC need to deliver to achieve the midpoint of FY’23 constant currency ARR guidance? Using FX rates as of September 30, 2022 What you need Actual Actual Actual to believe In millions FY'20 FY'21 FY'22 FY'23 Beginning ARR $ 1,043 $ 1,156 $ 1
Slide 34: Q1'23 Illustrative Constant Currency ARR Model
34 Q1’23 ILLUSTRATIVE CONSTANT CURRENCY ARR MODEL What does PTC need to deliver to achieve the midpoint of Q1’23 constant currency ARR guidance? Using FX rates as of September 30, 2022 What you need to Actual Actual Actual Actual Actual Actual Actual Actual believe In millions Q1'21 Q2'21 Q3'21 Q4'2
Slide 35: FY'23 Illustrative Free Cash Flow Model
35 FY’23 ILLUSTRATIVE FREE CASH FLOW MODEL What does PTC need to deliver to achieve FY’23 FCF guidance? In millions FY'22 Actual FY'23 Illustrative Comments Annual Run Rate (ARR) $ 1,572 $ 1,572 $ 1,760 $ 1,760 Midpoint of constant currency ARR guidance; FY'22 recasted at 9/30/22 rates Perpetual rev
Slide 36: Weathering a Storm
36 WEATHERING A STORM PTC has a strong track record of disciplined operational management Our top line is resilient due to our subscription business model and customer stickiness Recent cost optimization is a tailwind for margins and free cash flow in FY’23, compared to FY’22 Restructuring in FY’22
Slide 37: Appendix: FY'23 Guidance Assumptions
37 APPENDIX: FY’23 GUIDANCE ASSUMPTIONS We provide ARR guidance on a constant currency basis, using our FY’23 Plan foreign exchange rates (rates as of September 30, 2022) for all periods. We expect FY’23 organic churn to be ~5.5%. For cash flow, due to invoicing seasonality, and consistent with the
Slide 38: Appendix: ARR Recasted in New Reporting Structure
38 APPENDIX: ARR RECASTED IN NEW REPORTING STRUCTURE Using FY’22 Plan FX rates as of September 30, 2021 Actual Actual Actual Actual Actual Growth Growth Growth Growth Growth In millions FY'18 FY'19 FY'20 FY'21 FY'22 FY'18 FY'19 FY'20 FY'21 FY'22 ARR by Product Group (Constant Currency) CAD (Product
Slide 39: Forward-Looking Statements
39 FORWARD-LOOKING STATEMENTS Statements in this presentation that are not historic facts, including statements about our future financial and growth expectations and targets, and potential stock repurchases, are forward-looking statements that involve risks and uncertainties that could cause actual
Slide 40: Operating Measures
40 OPERATING MEASURES ARR: We provide an ARR (Annual Run Rate) operating measure to help investors understand and assess the performance of our business as a SaaS and on-premises subscription company. ARR represents the annualized value of our portfolio of active subscription software, cloud, SaaS,
Slide 41: Non-GAAP Financial Measures
41 NON-GAAP FINANCIAL MEASURES PTC provides supplemental non-GAAP financial measures to its financial results. We use these non-GAAP financial measures, and we believe that they assist our investors, to make period-to-period comparisons of our operating performance because they provide a view of our
Slide 42: Non-GAAP Reconciliation
42 NON-GAAP RECONCILIATION In millions FY'22 FY'21 Cash from Operations $435.3 $368.8 Capital expenditures ($19.5) ($24.7) Free Cash Flow $415.8 $344.1 Restructuring payments $40.8 $14.5 Transaction-related payments $11.8 $15.0 Non-ordinary course tax payment $17.9 Adjusted Free Cash Flow $468.5 $39
Slide 43: Thank You
DIGITAL TRANSFORMS PHYSICAL THANK YOU ptc.com Go900