Why PTC Inc (NASDAQ: PTC) stock is soaring

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PTC Inc (NASDAQ: PTC) stock rose over 8.1% in the pre-market session of 23rd January, 2020 (Source: Google finance) after the company posted better than expected earnings for the first quarter of FY 20. PTC reported Q1 ARR of $1.16 billion, representing 11% year-over-year increase, which is consistent with the guidance commentary the company had provided last quarter. ARR in the growth product group was up 36% year-over-year.

PTC in the first quarter of FY 20 has reported the adjusted earnings per share of 57 cents, beating the analysts’ estimates for the adjusted earnings per share of 45 cents. The company had reported the adjusted revenue growth of 8 percent to $356.11 million in the first quarter of FY 20, beating the analysts’ estimates for revenue by 2.95%. This is despite a 78% year-over-year decline in perpetual license revenue on the back of the end of perpetual license sales on January 1, 2019. The company posted the operating margin of 26%, which increased 200 basis points over Q4 ’19 and contracted 100 basis points compared to Q1 ’19, where the company experienced higher than expected perpetual license revenue resulting from the perpetual end of life program.

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For fiscal 2020, the company expects ARR to be in the range of $1.27 billion to $1.29 billion or 14% to 16% year-over-year growth and 13% to 15% on a constant currency basis. ARR forecasts includes about $15 million of positive FX and already embedded in the original guidance for the year is approximately $10 million of ARR or 1 point of growth from the Onshape acquisition. Further, the company expects Q2 constant currency ARR growth to be in line with Q1 results with ARR growth rates accelerating in the back half of the year. This increase is on back of both normal seasonality of the business and the backlog of deals booked in prior periods. For fiscal ’20, the company is expecting adjusted free cash flow to be in a range of $260 million to $280 million reflecting the positive FX impact of $5 million. The company is expecting fiscal ’20 total revenue to be in the range of $1.45 billion to $1.53 billion, which is an increase of $25 million at the midpoint of guidance. Non-GAAP EPS is now expected to be in the range of $2.15 to $2.65, an increase of $0.12 at the midpoint of guidance. The company expects fiscal ’20 operating expenses to grow approximately 9% year-over-year.

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