CIMdata PLM Industry Summary Online Archive
22 July 2008
Financial News
PTC Announces Fiscal 2008 Q3 Results
PTC reported results for its fiscal third quarter ended June 28, 2008.
Highlights
Q3 non-GAAP Results: Revenue of $272.7 million and EPS of $0.33
Q3 GAAP Results: Revenue of $271.7 million and EPS of $0.12
Q4 non-GAAP Guidance: Revenue of $290 to $300 million with EPS of $0.38 to $0.42
Q4 GAAP Guidance: Revenue of $289 to $299 million with EPS of $0.21 to $0.25
FY 2008 non-GAAP Guidance: Revenue of $1,070 million with 22% operating margin
FY 2008 GAAP Guidance: Revenue of $1,065 million with 12% operating margin
Q3 Results
C. Richard Harrison, president and chief executive officer, commented, “We achieved 21% year-over-year non-GAAP revenue growth in the third quarter reflecting contribution from the CoCreate Software business acquired on November 30, 2007, organic revenue growth and favorable currency impact. Importantly, we achieved double digit license revenue growth in every region except the Pacific Rim.” GAAP year-over-year revenue growth for the third fiscal quarter was 21%. Our third quarter non-GAAP revenue excludes the effect of purchase accounting on the acquired deferred maintenance revenue balance of CoCreate of approximately $1 million.
Financial and operating metrics are available on PTC’s web site at www.ptc.com/for/investors.htm.
Note: Q2 FY08 revenue by channel was revised, with $5.9 million of revenue (primarily maintenance) moving from the Direct category to the Channel category. The revised numbers are reflected in the table above.
Harrison added, “In the third quarter, PTC received orders from leading organizations, including Airbus, Bang & Olufsen, Gamesa, Raytheon, Sumitomo Wiring System, LTD., Toyota Motor Corporation, and Volvo Group. There were 13 customers from which we recognized more than $1 million of license and services revenue in Q3. This compares to 16 customers last quarter and 17 in the same period last year. We recognized $35.6 million of license and services revenue from such customers in Q3, compared with $37.6 million last quarter and $34.7 million in Q3 of last year.”
Neil Moses, chief financial officer, commented, “We delivered 21.3% non-GAAP operating margin in the third quarter, an 860 basis point improvement from the same period last year. Our year-to-date non-GAAP operating margin of 20.2% is up 610 basis points over the same period in fiscal 2007.” GAAP operating margins for Q3 of 2008 and the first nine months of fiscal 2008 were 11.7% and 10.1%, respectively. The Company’s non-GAAP tax rate in the third quarter of 2008 was 32% and its GAAP tax rate was 42%.
Moses continued, “During the quarter we recorded a $3.8 million restructuring charge related to our ongoing globalization initiative as we transition certain back-office functions to lower cost regions. We also recorded a one-time non-cash loss recorded to other income (expense) of $6.2 million during the quarter as we liquidated certain legal entities related to previous acquisitions. Both of these items are excluded from our non-GAAP results.”
Moses added, “Cash flow from operations was $53 million for the third quarter and $181 million year to date. We used $54 million in Q3 to repay amounts borrowed under our revolving credit facility to finance the CoCreate acquisition, leaving an outstanding loan balance of $110 million as of the end of the third quarter. Additionally, we used $5 million of cash during the quarter to repurchase our common shares under our current $50 million authorization. We have $45 million remaining under that authorization. Cash and cash equivalents were $242 million at the end of the third quarter of fiscal 2008.”
Q4 Outlook
“Looking forward to Q4, we are currently expecting non-GAAP revenue to be between $290 million and $300 million,” said Harrison. “Non-GAAP earnings per diluted share are expected to be between $0.38 and $0.42.” PTC expects GAAP Q4 revenue between $289 million and $299 million, and GAAP earnings per diluted share between $0.21 and $0.25. The Q4 guidance assumes a non-GAAP tax rate of 35% and GAAP tax rate of 37.5%.
The non-GAAP revenue guidance for Q4 excludes the effect of purchase accounting on the acquired deferred maintenance revenue balance of CoCreate of approximately $1 million. In addition, the Q4 non-GAAP earnings guidance excludes approximately $11 million of stock-based compensation expense, $10 million of acquisition-related amortization expenses, $5 million of restructuring expenses related to our continued globalization program and the related income tax effects.
FY08 Outlook
For the fiscal year ending September 30, 2008, PTC currently expects non-GAAP revenue to be approximately $1,070 million with non-GAAP earnings per diluted share in the range of $1.28 to $1.32. PTC expects GAAP revenue to be approximately $1,065 million with GAAP earnings per diluted share in the range of $0.58 to $0.62 for the fiscal year. The full fiscal year guidance assumes a non-GAAP tax rate of 34% and GAAP tax rate of 39%.
The non-GAAP revenue guidance for the full fiscal year excludes the effect of purchase accounting on the acquired deferred maintenance revenue balance of CoCreate of approximately $5 million. In addition, the non-GAAP earnings guidance excludes approximately $44 million of stock-based compensation expense, $35 million of acquisition-related amortization expense, $20 million of restructuring expenses primarily related to our continued globalization program, $2 million of in-process research and development expense related to acquisitions completed in the first quarter of 2008, $6 million of a non-cash loss recorded to other income (expense) resulting from the liquidation of certain legal entities related to previous acquisitions, and the related income tax effects.
Harrison concluded, “While we continue to remain mindful of the potential impact of a slowing economy in 2008, we are confident in our ability to achieve our Q4 and fiscal 2008 revenue and earnings targets. We are expecting modest sequential increases in our maintenance and services lines of business. We are expecting a modest year-over-year increase of license revenue in Q4 as we continue to expand and increase the effectiveness of our reseller channel, which accounts for more the 30% of our license revenue, and as we see strength in our pipeline for new license opportunities worldwide.”
Earnings Conference Call and Webcast
What: PTC Fiscal Q3 Conference Call and Webcast
When: Wednesday, July 23, 2008 at 8:30 a.m. Eastern Time
Dial-in: 1-888-566-8560or 1-517-623-4768
Call Leader: Richard Harrison
Passcode: PTC
Webcast: http://www.ptc.com/for/investors.htm
Replay: The audio replay of this event will be archived for public replay until 4:00 pm on July 28, 2008 at 1-866-516-0671 or 1-203-369-2035. To access the replay via webcast, please visit http://www.ptc.com/for/investors.htm.
Important Information About Non-GAAP References
PTC provides non-GAAP supplemental information to its financial results. Non-GAAP revenue excludes the effect of purchase accounting on the fair value of the acquired deferred maintenance revenue balance of CoCreate Software GmbH. Non-GAAP operating margin and EPS also exclude stock-based compensation expense, amortization of acquired intangible assets and acquired in-process research and development expenses, restructuring expenses, non-cash effects of liquidating subsidiaries and any one-time tax items, such as valuation allowance reversals. PTC provides this non-GAAP information to facilitate period-to-period comparisons of its operational performance by adjusting for episodic expenses. We believe that providing non-GAAP measures affords investors a view of our operating results that may be more easily compared to peer companies. PTC management also uses this and other non-GAAP financial information to evaluate, manage and plan our business because the information provides additional insight into ongoing financial performance. In addition, compensation of our executives is based in part on the performance of our business based on these non-GAAP measures. However, non-GAAP information should not be construed as alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on PTC’s financial results. Therefore, management uses, and investors should use, non-GAAP measures in conjunction with our reported GAAP results.
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