Jul 23 - PTC Q3 Revenue Up 21% to $272M with $14M Profit

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PTC Q3 Revenue Up 21% to $272M with $14M Profit

2nd best performing quarter in PTC's history and the best quarter in the last 9 years

See also
·	PTC Q3 Earnings Call new - full transcript, Seeking Alpha, July 23, 2008
·	PTC Q3 Profit Falls, Full Year Outlook Revised new - RTTNews, July 23, 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, July 23, 2008 - PTC (Nasdaq: PMTC - News), The Product Development Company, today 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.

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.

Q2 Q3 Q4 Q1 Q2 Q3 Y-Y
($ in millions) FY07 FY07 FY07 FY08 FY08 FY08 Change
-----------------------------------------

License $71.3 $62.1 $96.1 $67.2 $72.9 $77.6 25% Services 58.0 59.7 64.6 60.2 63.8 63.8 7%
Maintenance 98.8 103.1 106.0 113.8 121.1 130.3 26%

Total
Revenue $228.1 $224.9 $266.7 $241.2 $ 257.8 $271.7 21%

Europe         $82.9 $86.2 $101.6 $101.6 $106.2 $111.8 30%
North
America         89.4 86.9 102.2 84.5    88.2   90.0   4%
Pacific Rim     30.7 32.6   34.3 30.0    33.5   34.2   5%
Japan           25.1 19.2   28.6 25.1    29.9   35.7 86%
Total
Revenue       $228.1 $224.9 $266.7 $241.2 $257.8 $271.7 21%

Direct(a)   $179.2 $177.3 $215.3 $182.5 $190.3 $201.3 14%
                                         (a)
Channel(a)    48.9   47.6   51.4   58.7 67.5(a) 70.4   48%
Total
Revenue      $228.1 $224.9 $266.7 $241.2 $257.8 $271.7 21%

(a) 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:1-888-566-8560 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 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: 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.

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. 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 Nine Months Ended
                      June 28, June 30,   June 28, June 30
                        2008     2007       2008    2007
                      -----------------   ----------------
Revenue:
License               $77,557 $62,098   $217,658 $200,022 Service               194,191 162,766    553,125   474,605
                      -----------------   -----------------
Total revenue        271,748 224,864    770,783   674,627
                      =================   =================

Costs and expenses:

Cost of license
revenue(1)              8,760   4,084      20,106   11,855
Cost of service
revenue(1)             76,802   67,673    221,894 204,855
Sales and marketing(1) 78,762   74,573    223,149 215,694 Research and
development(1)         47,374   39,798    134,656 117,935
General and
administrative(1)      20,294   16,855     64,653   56,489 Amortization of
acquired intangible
assets                  4,044    1,764     11,252    5,440
In-process research
and development           --      544       1,887      544
Restructuring charge    3,790      --      15,367     --
Total costs and
expenses              239,826   205,291   692,964   612,812
Operating income       31,922    19,573    77,819    61,815
Other income
(expense), net         (7,110)    2,268    (5,859)    4,396
Income before
income taxes           24,812    21,841     71,960   66,211
Provision for
(benefit from)
income taxes           10,342   (58,624)   28,762 (46,806)
                     ------------------- ----------------
Net income           $14,470   $80,465   $43,198 $113,017
                     =================== =================
Earnings per share:
Basic                   $0.13    $0.71     $0.38    $1.00
Weighted average
shares outstanding     113,491 113,154   113,661 112,610
Diluted                 $0.12    $0.68     $0.37    $0.96
Weighted average
shares outstanding     117,363 117,500   117,565 117,423

(1) Stock-based compensation is accounted for under SFAS 123(R), "Share-Based Payment." The amounts in the tables above include stock-based compensation as follows:

                      Three Months         Nine Months
                         Ended                 Ended
                   June 28   June 30     June 28 June 30
                     2008     2007         2008    2007
                    ----------------     ---------------- Cost of license
revenue              $12      $60          $26     $100
Cost of service
revenue             2,298     993         6,867    4,671
Sales and
marketing           3,130    2,035        8,933    5,926
Research and
development         2,322    1,058        6,929    4,529 General and
administrative      3,387      884        9,926    7,281
                   ----------------      ----------------
Total stock-based
compensation        $11,149 $5,030      $32,681 $22,507
                   ================      =================

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

                      Three Months        Nine Months
                         Ended               Ended
                   ------------------- -------------------
                   June 28, June 30,   June 28, June 30
                     2008      2007       2008     2007
                   ---------------------------------------
GAAP revenue      $271,748   $224,864   $770,783 $674,627
Fair value
adjustment of
acquired CoCreate
deferred
maintenance revenue 978       --         3,920      --
                   ------------------- -------------------
Non-GAAP revenue $272,726   $224,864   $774,703 $674,627
                   =================== ===================

GAAP operating
income             $31,922   $19,573    $77,819   $61,815
Fair value
adjustment of
acquired CoCreate
deferred maintenance
revenue              978       --        3,920       --
Stock-based
compensation       11,149     5,030     32,681     22,507 Amortization of
acquired intangible
assets included
in cost of license
revenue             6,289     1,728     13,850      4,895
Amortization of
acquired intangible
assets included in
cost of service
revenue               17       17         51          66
Amortization of
acquired intangible
assets              4,044     1,764     11,252      5,440
In-process research
and development       --       544       1,887        544 Restructuring charge 3,790      --      15,367         --
                  ------------------- -------------------
Non-GAAP operating
income             $58,189   $28,656    $156,827   $95,267
                  =================== ===================

GAAP net income    $14,470   $80,465    $43,198   $113,017
Fair value
adjustment of
acquired CoCreate
deferred maintenance
revenue              978       --        3,920       --
Stock-based
compensation        11,149    5,030     32,681     22,507
Amortization of
acquired intangible
assets included in
cost of license
revenue              6,289    1,728     13,850     4,895
Amortization of
acquired intangible
assets included
in cost of service
revenue                17       17        51         66
Amortization of
acquired intangible
assets               4,044    1,764     11,252     5,440
In-process research
and development        --      544       1,887      544
Restructuring charge
                     3,790      --      15,367      --
One-time non-cash
loss included in
other income
(expense), net (2)   6,206      --       6,206      --
Income tax
adjustments (3)     (7,724) (71,049)   (22,371) (72,924)
                   ------------------- -------------------
Non-GAAP net income $39,219 $18,499    $106,041 $73,545
                   =================== ===================

GAAP diluted
earnings per share   $0.12     $0.68     $0.37    $0.96
Stock-based
compensation          0.09      0.04      0.28     0.19
All other items
identified above      0.12     (0.56)     0.25    (0.52)
                   ------------------- -------------------
Non-GAAP diluted
earnings per share   $0.33     $0.16     $0.90    $0.63
                   =================== ===================

Weighted average shares outstanding - diluted 117,363 117,500 117,565 117,423

(2) Reflects a one-time non-cash loss from the liquidation of certain legal entities related to previous acquisitions.

(3) Reflects the tax effect of non-GAAP adjustments above, as well as the effect of one-time tax benefits recorded in the three and nine months ended June 30, 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)

                              June 28,      September 30,
                                2008            2007
                             ----------    -------------

ASSETS

Cash and cash equivalents     $242,020       $263,271
Accounts receivable, net       180,094        217,101
Property and equipment, net     56,851         54,745
Goodwill and acquired
intangibles, net               617,574        325,052
Other assets                   226,499        230,144
                             ----------    -------------
Total assets                $1,323,038     $1,090,313
                             ==========    =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue              $265,632       $227,164
Borrowings under
revolving credit facility      109,556          --
Other liabilities              295,427        268,642 Stockholders' equity           652,423        594,507
                             ----------   -------------
Total liabilities and
stockholders' equity         $1,323,038      $1,090,313
                             ==========   =============

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

                         Three Months       Nine Months
                             Ended              Ended
                         ---------------   ---------------
                        June 28, June 30, June 28, June 30
                         2008      2007      2008    2007
                        ------- -------   ------- -------

Cash flows from
operating activities:
Net income $14,470 $80,465 $43,198 $113,017
Stock-based
compensation 11,149 5,030 32,681 22,507

Amortization of
acquired intangible
assets                  10,350     3,509   25,153    10,401
Depreciation and
other amortization       6,286     6,150   18,331    18,481 Accounts receivable        268    18,751   69,819    33,483
Accounts payable and
accruals(4)              1,041    (4,945) (29,155) (25,999)Deferred revenue        (5,411)      450   16,305   21,454
In-process research
and development           --        544     1,887     544 Income taxes             (868)   (65,380)   1,645 (62,308)
Other                   16,017    (5,625)   1,242 (16,508)
                      ------------------------------------
Net cash provided
by operating
activities              53,302    38,949 181,106 115,072

Capital expenditures    (9,785)   (4,746) (20,492) (17,139) Acquisitions of
businesses, net of
cash acquired (5)          --   (10,879) (261,592) (28,518)
Proceeds (payments)
from debt, net         (53,643)    --      98,999     --
Repurchases of common
stock                   (5,288) (1,809) (27,297) (1,809)
Other investing and
financing activities     3,929    2,949    (3,313) 7,302 Foreign exchange
impact on cash          (5,441) (2,535)   11,338   1,600
                       -------- --------   ------- -------

Net change in cash
and cash equivalents   (16,926) 21,929   (21,251) 76,508
Cash and cash
equivalents, beginning
of period              258,946 238,027   263,271 183,448
                       -------- -------   ------- -------
Cash and cash
equivalents, end of
period                $242,020 $259,956 $242,020 $259,956
                      ======== ======== ======== ========

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

(5) Acquisitions of businesses:

The nine months ended June 28, 2008 includes $248 million for our acquisition of CoCreate and $14 million for two other acquisitions, net of cash acquired.

The nine months ended June 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; and $4 million for the acquisition of the remaining equity interest in a controlled subsidiary.

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