CIMdata PLM Industry Summary Online Archive

27 April 2011

Financial News

PTC Announces Q2 Results and Initiates Q3 Guidance

PTC reported results for its second fiscal quarter ended April 2, 2011.

Highlights

  • Q2 Results: Revenue of $269.2 million and non-GAAP EPS of $0.26; GAAP EPS of $0.16
    • Non-GAAP operating margin of 15.7%; GAAP operating margin of 9.0%
    • Relative to Q2 guidance ($260 - $270 million in revenue with $0.22 to $0.26 non-GAAP EPS), currency fluctuations did not materially impact results
  • Q3 Guidance: Revenue of $275 to $285 million and non-GAAP EPS of $0.28 to $0.32
    • GAAP EPS of $0.16 to $0.20
    • Assumes $1.45 USD / EURO
  • FY’11 Targets: Revenue of $1,120 to $1,130 million and non-GAAP EPS of $1.20 to $1.25
    • GAAP EPS of $0.73 to $0.78
    • Expecting license revenue growth of 15% to 20%, low- to mid-teens services revenue growth, and high single-digit maintenance revenue growth
    • Non-GAAP operating margin of 17% to 18%; GAAP operating margin of 11% to 12%
    • Assumes $1.45 USD / EURO for H2’11

The Q2 non-GAAP results exclude $9.9 million of stock-based compensation expense, $7.6 million of acquisition- related intangible asset amortization, $0.6 million of acquisition-related expense, and $5.8 million of income tax adjustments. The Q2 non-GAAP results include a tax rate of 25% and 122 million diluted shares outstanding. The Q2 GAAP results include a tax rate of 19% and 122 million diluted shares outstanding.

Results Commentary

James Heppelmann, president and chief executive officer, commented, "PTC had a strong Q2, with revenue and EPS at the high-end of our guidance range. Our license revenue of $74.2 million was up 15% on a year-over-year basis, and included 40% year-over-year growth in Desktop license revenue. This was our 5th consecutive quarter of year-over-year improvement in Desktop license revenue and in our Channel business. Our Enterprise license revenue was down 15% year-over-year, and was significantly impacted by lower than expected Federal, Aerospace & Defense revenue in North America, as well as the dilutive effect of the strong Desktop revenue on PLM sales capacity. Overall, we delivered 12% total growth compared to the year ago period." On a constant currency basis, total growth was 11% and license growth was 13% compared to Q2'10.

"Our momentum in the PLM market continued with the announcement of 3 new strategically important ‘domino' accounts during Q2," Heppelmann continued. "Since 2009, we have won 25 domino accounts and we continue to expect to win a cumulative total of 30 domino accounts by the end of FY'11. Dominoes represent the largest of many competitive displacement opportunities, and we believe they demonstrate that PTC is gaining share and becoming recognized as the industry leader for both our technology and product development process expertise."

Heppelmann added, "We had 24 large deals (license + services revenue of more than $1 million) in Q2'11, compared to 22 last quarter and 18 in Q2'10. We believe this is an indicator of the strength of our pipeline for business opportunities with new and existing customers. During the quarter we recognized revenue from leading organizations such as ITT Corporation, Liebherr, Bandai Co. Ltd., Target Corporation, Tata Motors Limited, TJX Companies, Toyota Motor Corporation, and Volkswagen."

Jeff Glidden, chief financial officer, commented, "From a profitability standpoint we had a very strong quarter; we delivered $0.26 of non-GAAP EPS, up 30% from $0.20 per share in Q2 ‘10. Our Q2 non-GAAP result includes approximately $3 million of severance expenses related to a strategic reprioritization effort to support our long-term market opportunity in the Automotive vertical. We delivered $78 million in cash flow from operations during the quarter, and we ended Q2 with $260 million of cash, up from $183 million in Q1."

Outlook Commentary

“From a product portfolio perspective, FY’11 is an exciting year,” said Heppelmann. “We have already launched Mathcad Prime 1.0 and Windchill 10, and will be launching Creo 1.0 this summer. In addition, our pending acquisition of MKS, which we expect will close in early June, adds important breadth and depth to an already robust product portfolio, and further extends PTC’s long-term growth opportunity. Given the market momentum we are experiencing and the extent of our technology leadership position, we remain confident in our ability to achieve our longer-term goal of 20% non-GAAP EPS CAGR through 2014.”

 “For Q3, we are providing guidance of $275 to $285 million in revenue with non-GAAP EPS of $0.28 to $0.32, excluding any impact from the acquisition of MKS,” Glidden added. “From a revenue perspective, we are expecting approximately 15% to 25% year-over-year growth in license revenue in Q3, with our combined services and maintenance businesses up in the low teens, resulting in approximately 15% year-over-year growth in total revenue. We expect to resume our stock repurchases in Q3, with the goal of repurchasing approximately $55 million in total in FY’11.” For Q3, the GAAP EPS target is $0.16 to $0.20.

The Q3 guidance assumes a non-GAAP tax rate of 24%, a GAAP tax rate of 20% and 121 million diluted shares outstanding. The Q3 non-GAAP guidance excludes approximately $11.3 million of stock-based compensation expense, $7.7 million of acquisition-related intangible asset amortization expense, any acquisition-related expenses, and their related income tax effects.

Glidden continued, “Looking to the full year FY’11, we are increasing the low end of our revenue growth target from 10% to 11% growth, or $1,120 million. The mix of revenue is also changing, with lower license revenue growth being more than offset by stronger and more predictable services and maintenance revenue. We are now expecting total revenue growth of 11% to 12% driven by license revenue growth of 15% to 20%, low- to mid-teens services revenue growth and high single-digit maintenance revenue growth. We remain committed to achieving our FY’11 non-GAAP EPS target of $1.20 to $1.25, and will continue to balance investments to support future growth with our commitment to 20% non-GAAP EPS growth.” For FY’11, the GAAP EPS target is $0.73 to $0.78.

The FY’11 targets assume a non-GAAP tax rate of 24%, a GAAP tax rate of 22% and 121 million diluted shares outstanding. The FY’11 non-GAAP guidance excludes approximately $44.2 million of stock-based compensation expense, $29.9 million of acquisition-related intangible asset amortization, $0.7 million of foreign currency transaction losses, any acquisition-related expenses ($0.6 million through Q2), and their related income tax effects.

Q2 Earnings Conference Call and Webcast
Prepared remarks for the conference call have been posted to the investor relations section of our website.The prepared remarks will not be read live; the call will be primarily Q&A.

What:                          PTC Fiscal Q2 Conference Call and Webcast

When:                         Thursday, April 28th, 2011 at 8:30 am (ET)

Replay:                       The audio replay of this event will be archived for public replay until 4:00 pm (CT) on May 3, 2011 at 1-866-509-3683 or 203-369-1910. To access the replay via webcast, please visit www.ptc.com/for/investors.htm.

Important Information About Non-GAAP References

PTC provides non-GAAP supplemental information to its financial results. Non-GAAP operating expenses, margin and EPS exclude stock-based compensation expense, amortization of acquired intangible assets, acquisition-related expenses, foreign currency transaction losses related to a litigation resolution, and the related tax effects of the preceding items and any one-time tax items. We use these non-GAAP measures, and we believe that they assist our investors, to make period-to-period comparisons of our operational performance because they provide a view of our operating results without items that are not, in our view, indicative of our core operating results. We believe that these non-GAAP measures help illustrate underlying trends in our business, and we use the measures to establish budgets and operational goals, communicated internally and externally, for managing our business and evaluating our performance. We believe that providing non-GAAP measures affords investors a view of our operating results that may be more easily compared to the results of peer companies. Inaddition, 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 consider, non-GAAP measures in conjunction with our GAAP results.

For the unabridged press release with financial tables, please click HERE.

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