PTC’s Q4 ends fiscal year on a strong note
PTC announced fiscal Q4 and 2020 results a week ago and I haven’t had time for a full write-up — and now the earnings are starting to pile up. So here’s a quick recap of what we learned during the PTC call as well as some inferences we can make. I hope to get back to this for a more detailed write-up but make no promises.
PTC reported total revenue in Q4 of $391 million, up 17% as reported. By revenue type, recurring software revenue of $350 million, was up 21%; perpetual license revenue was $9 million, down 7%; and services revenue was $32 million, down 25%.
By product category, Core (CAD+PLM) represented $256 million, up 26% (up 25% in constant currencies, cc); Growth (AR, IoT, OnShape) was $57 million, up 59% (up 58% cc) and FSG (Focused Solutions like Servigistics) was $45 million, down 14% (down 15% cc).
For the full fiscal year, revenue was $1.458 billion, up 16% (up 17% cc), ahead of the company’s guidance of 12% to 14% growth. PTC says that growth across the product categories was negatively impacted by weak demand in several of its target verticals (specifically mentioned were retail and commercial aviation) because of COVID-19) but that it saw “solid CAD ARR* growth in the high single-digits (cc) with very strong PLM ARR growth in mid-teens (cc).” Asia, PTC said, led regional performance in CAD as economic activity recovered there first. As for PLM, “Medical Device and A&D market demand remains in high gear”
Note that OnShape is in the Growth bucket, not Core. PTC said OnShape saw ARR growth in fiscal 2020 that was slightly below plan because of COVID-related disruptions in FQ2 and FQ3 — but still came in with overall ARR growth of 32% for the year. And it seems to have accelerated: The company says Onshape had record bookings in FQ4, up “>80% YoY”.
Add here’s a fascinating factoid that we have no way of auditing:: PTC said OnShape saw “>700 competitive displacements in FY’20”. Let’s think about that. In our PLMish world, swapping out one CAD system for another is relatively rare — projects are in progress, or there are too many legacy parts to convert, or people need too much training — the list of reasons NOT TO is endless so the reason TO switch must be compelling. And OnShapw has made that argument over 700 times to teams? companies? individuals? PTC CEO Jim Heppelmann said that the majority of these moved users from SolidWork, “as clear evidence of the disruptive nature of Onshape’s SaaS based solution in what has been a competitive mature market with entrenched incumbent players.” Interesting trend to watch.
There are partnership updates, too –see here— but the most interesting, to me, was the continued success of Creo Simulation Live, which PTC delivers with ANSYS. PTC sees “broad demand across automotive, medical device, manufacturing, and high-tech” with added high-fidelity simulation capabilities launching in the upcoming Creo 7 release.
OK. So, what does it all mean? PTC says it has a robust pipeline heading into fiscal 2021, based on the strong bookings the company saw in Q4 of fiscal 2020. Catalysts include the huge interest in digital transformation we’re seeing everywhere, as companies try to adjust to pandemic-driven challenges, the need to collaborate remotely, and growing interest in remote asset management.
For fiscal 2021, PTC sees some economic improvement in the second half of the fiscal year (so March to September 2021 –not that far off!). PTC forecasts total revenue of $1.55 billion to $1.60 billion for fiscal 2021, up 6% to 10%.
*Why write about ARR? Because that’s what PTC gives us. PTC defines ARR, an “Annual Run Rate … as the annualized expected subscription and support cash”.