Oct 29 - PTC Q4 Revenue Up 12% to $300M with $36.5M Profit

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PTC Q4 Revenue Up 12%, Passes $1 Billion for FY08

Company records profit of $37M for quarter and $80M for year

See also
·	PTC F4Q08 Earnings Call Transcript - Seeking Alpha, Oct 29, 2008
·	PTC website
·	TenLinks Pro/E directory - by TenLinks.com
	Pro/E Reading Room - features, reviews, tutorials and more by CADdigest.com
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NEEDHAM, MA, Oct 29, 2008 - PTC (Nasdaq: PMTC - News), The Product Development Company, today reported results for its fiscal fourth quarter and year ended September 30, 2008.

Highlights

Q4 non-GAAP Results: Revenue of $300.2 million and EPS of $0.45
Q4 GAAP Results: Revenue of $299.5 million and EPS of $0.31
FY 2008 non-GAAP Results: Revenue of $1,075 million with EPS of $1.36
FY 2008 GAAP Results: Revenue of $1,070 million with EPS of $0.68
Q1 non-GAAP Guidance: Revenue of $250 to $260 million with EPS of $0.23 to $0.29
Q1 GAAP Guidance: Revenue of $250 to $260 million with EPS of $0.11 to $0.17
FY 2009 non-GAAP Target: Revenue of $1,100 million with EPS of $1.35 to $1.40
FY 2009 GAAP Target: Revenue of $1,100 million with EPS of $0.85 to $0.90

Q4 Results

C. Richard Harrison, president and chief executive officer, commented, “We achieved record revenue in our fourth quarter and full fiscal year. Our non-GAAP year-over-year revenue growth was 13% in the fourth quarter and 14% for the full year, reflecting contribution from the CoCreate Software business acquired on November 30, 2007, favorable currency impact and organic growth. Importantly, we achieved $502 million in non-GAAP maintenance revenue in FY’08, which is largely a recurring revenue stream, and our reseller channel delivered 39% year-over-year growth.” GAAP year-over-year revenue growth was 12% for the fourth fiscal quarter and 14% for the full year. GAAP maintenance revenue was $498 million. Non-GAAP revenue and non-GAAP maintenance revenue exclude the effect of purchase accounting on the acquired deferred maintenance revenue balance of CoCreate of approximately $1 million in the fourth quarter and $5 million for the full year.

The following tables provide further detail on PTC’s GAAP revenue performance by line of business, region and distribution channel. Further financial and operating metrics are available on PTC’s web site at www.ptc.com/for/investors.htm.

($ in M) Q4FY Q1FY Q2FY Q3FY Q4FY Q4Y-Y FY FY Y-Y
’07 ’08 ’08 ’08 ’08 Change ’08 Change

License $96.1 $67.2 $72.9 $77.6 $98.5 3% $316.2 7% Services 64.6 60.2 63.8 63.8 68.8 7% 256.6 8% Maintenance106.0 113.8 121.1 130.3 132.2 25% 497.5 22% Total $266.7 $241.2 $257.8 $271.7 $299.5 12% $1,070.3 14%

Europe $101.6 $101.6 $106.2 $111.8 $130.7 29% $450.3 27% Americas 102.2 84.5   88.2   90.0   101.9 0%   364.6 0%
Pacific
Rim      34.3   30.0   33.5 34.2 39.5    15%    137.2 9%
Japan    28.6   25.1   29.9 35.7 27.4   -4 %   118.2 21% Total $266.7 $241.2 $257.8 $271.7 $299.5 12% $1,070.3 14%

Direct $215.3 $182.5 $190.3 $201.3 $224.2 4% $798.4 7% Channel 51.4 58.7 67.5 70.4 75.3 47% 271.9 39% Total $266.7 $241.2 $257.8 $271.7 $299.5 12% $1,070.3 14%

Harrison added, “In the fourth quarter, PTC received major orders from leading organizations, including Continental AG, Cisco, China Shipbuilding Group, EADS, Gildemeister, Hager, Kellog Brown and Root, NASA, SMS Demag AG, Redcats, Schaeffler, Toyota, Tyco, US Army, Wuhan Ship Development and Xian Aircraft.”

“There were 25 customers from which we recognized more than $1 million of license and services revenue in Q4. This compares to 13 customers last quarter and 22 in the same period last year. We recognized $61.3 million of license and services revenue from such customers in Q4, compared with $35.6 million last quarter and $58.2 million in Q4 of last year.”

Neil Moses, chief financial officer, commented, “We delivered 24.9% non-GAAP operating margin in the fourth quarter, an 80 basis point improvement from the same period last year. Our FY’08 non-GAAP operating margin of 21.6% is up 460 basis points over fiscal 2007.” GAAP operating margins for Q4 of 2008 and the full fiscal year 2008 were 15.8% and 11.7%, respectively. The Company’s non-GAAP tax rate was 27% in Q4 of 2008 and 31% for the full year. PTC’s GAAP tax rate was 22% in Q4 and 33% for the full year.

Moses continued, “During the quarter, we recorded a $4.7 million restructuring charge related to our ongoing globalization initiative as we continue to transition certain back-office functions to lower cost regions.”

Moses added, “Cash flow from operations was $41 million for the fourth quarter. We generated $222 million of cash flow from operations for the full fiscal year, compared to $127 million in FY’07. We used $11 million in Q4 to repay amounts borrowed under our revolving credit facility to finance the CoCreate acquisition, leaving an outstanding loan balance of $89 million at the end of the fourth quarter. Cash and cash equivalents were $257 million at the end of fiscal 2008.”

FY’09 Outlook

For the fiscal year ending September 30, 2009, PTC currently expects revenue to be approximately $1,100 million with non-GAAP earnings per diluted share in the range of $1.35 to $1.40. PTC expects GAAP earnings per diluted share in the range of $0.85 to $0.90 for the 2009 fiscal year. The full fiscal year guidance assumes a non-GAAP and GAAP tax rate of 30%.

The non-GAAP earnings guidance excludes approximately $47 million of stock-based compensation expense, $37 million of acquisition-related intangible asset amortization expense and the related income tax effects.

Harrison said, “Given the potential impact of a slowing economy in 2009 and currency fluctuations, we believe that our outlook and initiatives reflect a warranted balance of caution about next year and optimism about the longer-term health and growth potential of the business. We start the year with an expanded direct sales force resulting from investments made in fiscal 2008, and intend in fiscal 2009 to increase our investment in marketing in support of our reseller channel, in sales to develop a network of enterprise resellers, in services to develop an ecosystem of strategic services partners, and in R&D to further improve the breadth and competitiveness of our product portfolio.”

Moses added, “We remain focused on enhancing our longer-term business model through our on-going efforts to evolve our distribution model, globalize our workforce, and leverage the value of our Services business. Given the current difficult economic outlook, we are expecting FY’09 non-GAAP operating margins to be comparable to FY’08; however, we remain committed to further expanding our operating margins over the longer-term and believe the strategic investments we are making this year position us well for the future. Should our revenue estimates prove conservative for the year, there is opportunity for continued margin expansion in FY’09.”

Q1 FY’09 Outlook

“Looking forward to Q1, we are currently expecting revenue to be between $250 million and $260 million,” said Harrison. “Non-GAAP earnings per diluted share are expected to be between $0.23 and $0.29.” PTC expects GAAP Q1 earnings per diluted share between $0.11 and $0.17. The Q1 guidance assumes a non-GAAP and GAAP tax rate of 30%.

The Q1 non-GAAP earnings guidance excludes approximately $11 million of stock-based compensation expense, $9 million of acquisition-related intangible asset amortization expenses and the related income tax effects.

Earnings Conference Call and Webcast

What: PTC Fiscal Q4 Conference Call and Webcast
IMPORTANT: Supplemental financial and operating metric information and prepared remarks with respect to tomorrow’s conference call have been posted to the investor relations section of our website at www.ptc.com. The prepared remarks will not be read live; the call will be primarily Q&A.
When: Wednesday, October 29, 2008 at 8:30 a.m. Eastern Time
Dial-in: 1-888-566-8560 or 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 November 3, 2008 at 1-800-947-6592 or 1-402-220-4606. 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, as applicable, stock-based compensation expense, amortization of acquired intangible assets, acquired in-process research and development expenses, restructuring expenses, 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. Therefore, management uses, and investors should use, non-GAAP measures in conjunction with our reported GAAP results. Please refer to the attached tables for a reconciliation between GAAP results and the non-GAAP supplemental information.

About PTC

PTC (Nasdaq: PMTC - News) provides leading product lifecycle management (PLM), content management and dynamic publishing solutions to more than 50,000 companies worldwide. PTC customers include the world's most innovative companies in manufacturing, publishing, services, government and life sciences industries. PTC is included in the S&P Midcap 400 and Russell 2000 indices. For more information on PTC, please visit http://www.ptc.com.

PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

                   Three Months Ended       Year Ended
                     Sep 30,   Sep 30,    Sep 30,   Sep 30,
                      2008      2007       2008      2007
Revenue:
License             $98,533    $96,103 $316,191   $296,125
Service             201,014    170,549   754,139    645,154
Total revenue       299,547    266,652 1,070,330    941,279

Costs and expenses:

Cost of license
revenue(1)           9,149       4,228    29,255     16,083
Cost of service
revenue(1)          79,637      69,872   301,531    274,727
Sales and
marketing(1)        83,731      76,521   306,880    292,215
Research and
development(1)      47,366      44,416   182,022    162,351 General and
administrative(1)   23,176      23,288    87,829     79,777
Amortization of
acquired intangible
assets               4,327       2,027    15,579      7,467
In-process research
and development       --           --      1,887        544
Restructuring
charges              4,735      15,347    20,102     15,347
Total costs and
expenses           252,121     235,699   945,085    848,511

Operating income    47,426      30,953   125,245     92,768
Other income
(expense), net      (500)        2,496    (6,359)     6,892
Income before
income taxes       46,926       33,449   118,886     99,660
Provision for
(benefit from)
income taxes       10,422       2,810     39,184   (43,996)
Net income        $36,504     $30,639    $79,702 $143,656
Earnings per
share: Basic        $0.32      $0.27      $0.70     $1.27
Weighted average
shares outstanding 113,829    113,104    113,703   112,734 Diluted             $0.31      $0.26      $0.68     $1.22
Weighted average
shares outstanding 118,780    117,702    117,870   117,494

(1) The amounts in the tables above include stock-based compensation as follows

                         Three Months Ended   Year Ended
                          Sep 30, Sep 30, Sep 30, Sep 30,
                           2008     2007     2008    2007

Cost of license revenue     $12      $38      $38     138
Cost of service revenue    2,305    2,741    9,172   7,412
Sales and marketing        3,296    3,059   12,229   8,985
Research and development   2,500    2,676    9,429   7,205
General and administrative 3,602    5,424   13,528 12,705
Total stock-based
compensation             $11,715   13,938 $44,396 36,445

PARAMETRIC TECHNOLOGY CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)

                      Three Months Ended     Year Ended
                      Sep 30, Sep 30,   Sep 30,   Sep 30,
                       2008     2007      2008      2007
GAAP revenue         $299,547 $266,652 $1,070,330 $941,279
Fair value
adjustment of
acquired CoCreate
deferred maintenance
revenue                668       --       4,588      --
Non-GAAP revenue     $300,215 $266,652 $1,074,918 $941,279

GAAP operating
income               $47,426   $30,953   $125,245 $92,768
Fair value
adjustment of
acquired CoCreate
deferred maintenance
revenue                668        --       4,588      --
Stock-based
compensation          11,715    13,938    44,396    36,445
Amortization of
acquired intangible
assets included in
cost of license
revenue                5,991    1,925     19,841     6,820
Amortization of
acquired intangible
assets included in
cost of service
revenue                 16       16         67         82
Amortization of
acquired intangible
assets                 4,327    2,027     15,579     7,467
In-process research
and development          --       --       1,887       544
Restructuring charge   4,735   15,347     20,102    15,347
Non-GAAP operating
income               $74,878 $64,206   $231,705 $159,473

GAAP net income      $36,504 $30,639    $79,702 $143,656
Fair value adjustment
of acquired CoCreate
deferred maintenance
revenue                668       --        4,588      --
Stock-based
compensation          11,715   13,938     44,396    36,445
Amortization of
acquired intangible
assets included in
cost of license
revenue                5,991    1,925     19,841     6,820
Amortization of
acquired intangible
assets included in
cost of service
revenue                  16       16        67         82
Amortization of
acquired intangible
assets                 4,327    2,027     15,579     7,467
In-process research
and development          --       --       1,887       544
Restructuring charge   4,735   15,347     20,102    15,347
One-time non-cash loss
included in other income
(expense), net (1)       --       --       6,206       --
Income tax
adjustments (2)       (9,984) (20,760) (32,355) (93,684) Non-GAAP net income $53,972   $43,132 $160,013 $116,677

GAAP diluted earnings
per share              $0.31    $0.26     $0.68     $1.22
Stock-based
compensation            0.10     0.12      0.38      0.31
All other items
identified above        0.04    (0.01)     0.30     (0.54)
Non-GAAP diluted
earnings per share     $0.45    $0.37     $1.36     $0.99

Weighted average shares
outstanding - diluted 118,780 117,702 117,870 117,494

(1) Reflects a one-time non-cash loss of $6.2 million recorded in the third quarter of 2008 from liquidations of certain legal entities related to previous acquisitions.

(2) Reflects the tax effect of non-GAAP adjustments above, as well as the effect of one-time tax benefits recorded in:

a. the fourth quarter of 2008 of $1.9 million; and

b. the third quarter of 2007 due to the reversal of the valuation allowance recorded in the United States and a foreign jurisdiction of $58.9 million and the favorable resolution of a tax claim of $3.9 million.

PARAMETRIC TECHNOLOGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

Sep 30, Sep 30,
2008 2007

ASSETS

Cash and cash equivalents          $256,941       $263,271
Accounts receivable, net            201,509        217,101
Property and equipment, net          55,253         54,745
Goodwill and acquired
intangibles, net                    587,537        325,052
Other assets                        248,333        230,144

Total assets $1,349,573 $1,090,313

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue                   $258,295       $227,164
Borrowings under revolving
credit facility                      88,505           --
Other liabilities                   300,248        268,642
Stockholders' equity                702,525        594,507

Total liabilities and
stockholders' equity $1,349,573 $1,090,313

PARAMETRIC TECHNOLOGY CORPORATION UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

                      Three Months Ended     Year Ended
                       Sep 30, Sep 30,   Sep 30, Sep 30,
                        2008     2007      2008      2007

Cash flows from
operating activities:
Net income             $36,504 $30,639 $79,702 $143,656
Stock-based
compensation            11,715   13,938   44,396    36,445
Amortization of
acquired intangible
assets                  10,334   3,969    35,487    14,370
Depreciation and
other amortization       6,203   6,348    24,534    24,829
Accounts receivable   (27,813) (36,267)   42,006    (2,784) Accounts payable
and accruals(1)        17,942   22,675   (11,213)   (3,556)
Deferred revenue      (14,228) (23,841)    2,077    (2,387)
In-process research
and development          --       --       1,887       544
Income taxes           (7,362) 1,636    (5,717)   (60,672)
Other                   7,839 (6,795)    9,081    (23,071)
Net cash provided by
operating activities   41,134 12,302   222,240    127,374

Capital expenditures   (4,947) (6,918) (25,439)   (24,057) Acquisitions of businesses,
net of cash acquired (2) --    (2,574) (261,592)   (31,092) Proceeds (payments)
from debt, net        (10,860)   --     88,139        --
Repurchases of
common stock             --    (8,143) (27,297)    (9,952)
Other investing and
financing activities   4,928    1,626    1,615       8,928
Foreign exchange
impact on cash       (15,334)   7,022   (3,996)      8,622

Net change in cash
and cash equivalents 14,921    3,315   (6,330)     79,823
Cash and cash
equivalents, beginning
of period            242,020 259,956   263,271    183,448
Cash and cash equivalents,
end of period       $256,941 $263,271 $256,941   $263,271

(1) Includes accounts payable, accrued expenses, and accrued compensation and benefits.

(2) Acquisitions of businesses:

a. The year ended September 30, 2008 includes $248 million for our acquisition of CoCreate and $14 million for two other acquisitions, net of cash acquired.

b. The year ended September 30, 2007 includes $16 million for our acquisition of ITEDO and $7 million for our acquisition of NC Graphics, both net of cash acquired; $2 million of contingent purchase price earned in the first quarter of 2007 related to 2006 acquisitions; $2 million for our acquisition of Net Regulus; and $4 million for the acquisition of the remaining equity interest in a controlled subsidiary.

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