CIMdata PLM Industry Summary Online Archive

29 July 2009

Financial News

PTC Announces Q3 Results

PTC reported results for its third fiscal quarter ended July 4, 2009.

Highlights

•  Q3 Results: Revenue of $226.2 million and non-GAAP EPS of $0.20

o Non-GAAP operating margin of 13.0%; GAAP operating margin of 0.9%

o GAAP EPS of $0.03, including $6.6 million restructuring charge to reduce operating expenses

o Relative to Q3 guidance, currency was favorable to revenue by approximately $3 million and unfavorable to expenses by approximately $2 million

•  Q4 Guidance: Revenue of $235 to $245 million and non-GAAP EPS of $0.25 to $0.30

o GAAP EPS of $0.09 to $0.13

o Assumes $1.40 EURO / USD, up from $1.30 EURO / USD in prior guidance

•  FY 2009 Targets: Revenue of approximately $931 million and non-GAAP EPS of approximately $0.77

o Non-GAAP operating margin of approximately 13%; GAAP operating margin of approximately 1%

o GAAP EPS of approximately $0.24

o Approximately 15% non-GAAP and 2% GAAP operating margin for H2’09

The Q3 non-GAAP results exclude a $6.6 million restructuring charge, $11.5 million of stock-based compensation expense, $9.4 million of acquisition-related intangible asset amortization and in-process research and development expenses and $8.3 million of income tax adjustments. The Q3 results include a non-GAAP tax rate of 21% and a GAAP tax benefit rate of 153%.

Q3 Results Commentary & Outlook

C. Richard Harrison, chairman and chief executive officer, commented, “On a constant currency and non-GAAP basis, our total Q3 revenue was down 11% compared to last year, which in this challenging economy highlights the stability provided by our maintenance and services businesses. Importantly, on a sequential basis we are seeing a number of positive data points: 1) total revenue is stabilizing, 2) we delivered license revenue growth in all of our major geographies except Japan, 3) active maintenance paying seats are up, driven by Windchill seat growth, and 4) we won three additional strategically important “domino” accounts during Q3.”

“Our pipeline for new business opportunities remains strong and lead times to close enterprise deals seem to be shortening,” continued Harrison. “We received major orders from leading organizations such as BAE Systems, Caterpillar, EDF Group, Knorr Bremse, Komatsu America Corporation, NASA, Otis Elevator, Raytheon, RWTH Aachen University, and the US Army.”

James Heppelmann, president and chief operating officer added, “We believe that our technology leadership position in the industry is becoming increasingly clear. In addition to competitive displacement wins in the market, PTC continues to be on the forefront of innovation with our social product development initiative and partnership with Microsoft, our growing product analytics platform, and our Arbortext product information delivery solutions. We are very optimistic about the long-term opportunity for PTC and will continue to make strategic investments that we believe are critical to delivering value to our customers and gaining market share, while remaining mindful of our goal of 20% non-GAAP EPS growth for 2010 and beyond.”

Neil Moses, chief financial officer, commented, “Our Q3 operating margins and EPS were stronger than expected primarily due to stronger than expected license revenue, favorable currency impact as well as a lower than anticipated tax rate. Our balance sheet remains strong with $231 million of cash, down from $268 million in Q2 primarily due to our acquisition of Relex, which we acquired in June to further expand our product analytics platform. We also have an additional $175 million available on our revolving credit facility.”

“Looking forward to Q4, we are initiating guidance of $235 to $245 million in revenue with non-GAAP EPS of $0.25 to $0.30,” continued Moses. “Consequently, we are now targeting FY’09 revenue of approximately $931 million, 13% non-GAAP operating margins, and non-GAAP EPS of approximately $0.77.”

The Q4 guidance assumes a non-GAAP tax rate of 20%, a GAAP tax benefit rate in excess of 40% and 119 million diluted shares outstanding. The Q4 non-GAAP guidance excludes approximately $14 million of stock-based compensation expense, $9 million of acquisition-related intangible asset amortization expense, $10 million of restructuring related expense and the related income tax effects.

The FY’09 target assumes a non-GAAP tax rate of 21%, a GAAP tax benefit rate in excess of 130% and 117 million diluted shares outstanding. The FY’09 non-GAAP guidance excludes approximately $43 million of stock-based compensation expense, $36 million of acquisition-related intangible asset amortization and in-process research and development expense, $26 million of restructuring related expense and the related income tax effects.

Q3 Earnings Conference Call and Webcast

Supplemental financial and operating metric information and prepared remarks for the conference call will be posted to the investor relations section of our website simultaneously with this press release. The prepared remarks will not be read live; the call will be primarily Q&A.

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 revenue of CoCreate Software GmbH. Non-GAAP operating expenses, margin and EPS exclude stock-based compensation expense, amortization of acquired intangible assets, acquired in-process research and development expense, restructuring charges, non-cash effects of liquidating subsidiaries, and the related tax effects of the preceding items 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 certain non-cash and certain 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 an alternative to GAAP information as the items excluded from the non-GAAP measures often have a material impact on PTC’s financial results. Management uses, and investors should use, non-GAAP measures in conjunction with our GAAP results.

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