PTC Q2 Revenue Up 13% to $258M with $18.8M Profit
 NEEDHAM,
MA, Apr 23, 2008 - PTC (Nasdaq: PMTC - News), the Product Development
Company, today reported results for its fiscal second quarter ended March
29, 2008.
Highlights
- Q2 non-GAAP Results: Revenue of $259.5 million and EPS of
$0.30
- Q2 GAAP Results: Revenue of $257.8 million and EPS of $0.16
- Q3 non-GAAP Guidance: Revenue of $260 to $270 million with
EPS of $0.28 to $0.32
- Q3 GAAP Guidance: Revenue of $259 to $269 million with EPS of
$0.14 to $0.18
- Fiscal Year 2008 non-GAAP Guidance: Revenue of $1,060 million
with 22% operating margin
- Fiscal Year 2008 GAAP Guidance: Revenue of $1,055 million
with 13% operating margin
Q2 Results C. Richard Harrison, president and chief executive officer,
commented, "We achieved 14% year-over-year non-GAAP revenue growth in the
second quarter reflecting revenue contribution from the CoCreate Software
business, which we acquired on November 30, 2007, strong continued license
revenue growth in Europe, services and maintenance revenue growth in all
geographies, as well as a favorable currency impact. As expected, the
softness in license sales in North America continued." GAAP year-over-year
revenue growth for the second fiscal quarter was 13%. Our non-GAAP revenue
excludes the effect of purchase accounting on the acquired deferred
maintenance revenue balance of CoCreate of approximately $1.7 million.
The following tables provide further detail on PTC's GAAP revenue
performance by line of business, region and distribution channel. Further
financial and operating metrics are available on PTC's web site at
www.ptc.com/for/investors.htm.
($ in millions)FY07
FY07 FY07 FY08 FY08 Y-Y Change
-----------------------------------------------------------License
$ 71.3 $ 62.1 $ 96.1 $ 67.2 $ 72.9 2%
Services 58.0
59.7 64.6 60.2 63.8
10%
Maintenance 98.8 103.1 106.0
113.8 121.1 23%
-----------------------------------------------------------
Total Revenue $228.1 $224.9 $266.7 $241.2 $257.8
13%
Europe $ 82.9 $ 86.2 $101.6
$101.7 $106.2 28%
North America 89.4 86.9 102.2
84.5 88.2 -1%
Pacific Rim 30.7 32.6
34.3 29.9 33.5 9%
Japan 25.1
19.2 28.6 25.1 29.9
19%
-----------------------------------------------------------
Total Revenue $228.1 $224.9 $266.7 $241.2 $257.8
13%
Direct $179.2 $177.3 $215.3
$182.5 $196.2 9%
Channel 48.9
47.6 51.4 58.7 61.6
26%
-----------------------------------------------------------
Total Revenue $228.1 $224.9 $266.7 $241.2 $257.8
13%
"We continue to see strong interest in our offerings," continued
Harrison, "particularly for our Windchill product, which is the only
CAD-platform agnostic PLM product on the market today that is built on an
integral architecture. In the second quarter, PTC received orders from
leading organizations, including Airbus S.A.S., Hitachi High-Technologies
Corporation, BAE Systems, Liebherr, Huawei Technologies Company Limited, VDO
Automotive and Volkswagen. Importantly, there were 16 customers from which
we recognized more than $1 million of license and services revenue in the
second quarter. This is up from 12 customers last quarter and comparable to
16 in the same period last year. We recognized $37.6 million of license and
services revenue from these customers in Q2, compared with $32.1 million
last quarter and $35.6 million in Q2 of last year."
Neil Moses, chief financial officer, commented, "We delivered 21.0%
non-GAAP operating margin in the second quarter, a 630 basis point
improvement from the same period last year. The increase was driven
primarily by the benefits of our globalization strategy, the continued
evolution of our distribution model, improvements to our services business
model, and the immediate non-GAAP operating margin accretion provided by
CoCreate. Our year-to-date non-GAAP operating margin of 19.6% is up 480
basis points over the first half of fiscal 2007." GAAP operating margin for
Q2 of 2008 and the first half of fiscal 2008 was 12.0% and 9.2%,
respectively. The Company's non-GAAP tax rate in the second quarter of 2008
was 34% and its GAAP tax rate was 38.6%.
Moses added, "Cash flow from operations was $107 million for the second
quarter. We used $52 million in repayment of amounts borrowed under our
revolving credit facility to finance the CoCreate acquisition, leaving a
balance of $164.4 million as of the end of the second quarter. Additionally,
we used $22 million of cash during the quarter to repurchase our common
shares under our current $40 million authorization. We have $8 million
remaining under that authorization. Cash and cash equivalents were $259
million at the end of the second quarter of 2008."
Q3 Outlook
"Looking forward to Q3, we are currently expecting non-GAAP revenue to be
between $260 million and $270 million," said Harrison. "Non-GAAP earnings
per diluted share are expected to be between $0.28 and $0.32; we are
expecting a slight sequential increase in sales and marketing expense in the
third quarter."
PTC expects GAAP third quarter revenue between $259 million and $269
million, and GAAP earnings per diluted share between $0.14 and $0.18. The Q3
guidance assumes a non-GAAP tax rate of 35% and GAAP tax rate of 37.5%.
The non-GAAP revenue guidance for the third quarter excludes the effect
of purchase accounting on the acquired deferred maintenance revenue balance
of CoCreate of approximately $1 million. In addition, the non-GAAP earnings
guidance excludes approximately $11 million of stock-based compensation
expense, $9 million of acquisition-related amortization expense and $2
million of restructuring expenses related to our continued globalization
program.
FY08 Outlook
For the fiscal year ending September 30, 2008, PTC currently expects
non-GAAP revenue to be approximately $1,060 million with non-GAAP earnings
per diluted share at the high-end of its previously announced range of $1.17
and $1.27. PTC expects GAAP revenue to be approximately $1,055 million with
GAAP earnings per diluted share in the range of $0.66 and $0.77 for the
fiscal year. The full fiscal year guidance assumes a non-GAAP tax rate of
35% and GAAP tax rate of 37.5%.
Harrison concluded, "While we remain mindful of the potential impact of a
slowing economy in 2008, we are confident in our ability to achieve our
fiscal 2008 revenue and earnings targets. Approximately half of our expected
non-GAAP revenue growth for the year of 13% is expected to come from the
CoCreate business. The remaining half of the expected growth implies 6%
year-over-year organic growth. This growth is consistent with our full year
target, which anticipated a softening US economy. We believe this expected
growth rate is very achievable given the strong growth we are achieving
outside of the US, and given the strength of services and maintenance
businesses."
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 stock-based
compensation expense, $32 million of acquisition-related amortization
expense, $16 million of restructuring expenses primarily related to our
continued globalization program, and $2 million of in-process research and
development expense related to acquisitions completed in the first quarter
of 2008.
Earnings Conference Call and Webcast
- What: PTC fiscal Q2
results conference call and webcast
- When: Wednesday, April 23,
2008 at 10:00 a.m. Eastern Time.
- Dial-in: 1-888-566-8560 or
1-517-623-4768 Call Leader: Richard Harrison, Passcode: PTC
- Webcast:
www.ptc.com/for/investors.htm
- Replay: The audio replay of this
event will be archived for public replay until 4:00 pm on April 28, 2008
at 1-888-568-0346 or 1-203-369-3464. 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 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 exclude stock-based
compensation expense, amortization of intangible assets and acquired
in-process research and development expenses, restructuring expenses, 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
Six
Months Ended Months Ended
---------------- ----------------
March March March
March
29, 31, 29,
31,
2008 2007 2008
2007
----------------------------------
Revenue:
License
$ 72,910 $ 71,336 $140,101 $137,924
Service
184,883 156,760 358,934 311,839
----------------------------------
Total revenue
257,793 228,096 499,035 449,763
----------------------------------
Costs and expenses:
Cost of license revenue(1) 6,599 4,211 11,346
7,771
Cost of service revenue(1) 74,054 68,614 145,092 137,182
Sales and marketing(1) 73,359 71,560 144,387
141,121
Research and development(1)45,734 40,153 87,282
78,137
General and
administrative(1)
20,808 20,711 44,359 39,634
Amortization of acquired
intangible assets
4,315 1,588 7,208 3,676
In-process research and
development
-- --
1,887 --
Restructuring charge 1,892
-- 11,577 --
----------------------------------
Total costs and expenses 226,761 206,837 453,138 407,521
----------------------------------
Operating income
31,032 21,259 45,897 42,242
Other (expense)income, net (355) 1,348
1,251 2,128
----------------------------------
Income before income
taxes
30,677 22,607 47,148 44,370
Provision for income
taxes
11,829 5,208 18,420 11,818
----------------------------------
Net income
$ 18,848 $ 17,399 $ 28,728 $ 32,552
================================
Earnings per share:
Basic
$ 0.17 0.15 $ 0.25 $ 0.29
Weighted average shares
outstanding
113,811 112,845 113,746 112,337
Diluted
$ 0.16 0.15 $ 0.24 $ 0.28
Weighted average shares
outstanding
117,247 117,486 117,667 117,384
(1) For each of the three and six months ended March 29, 2008 and March
31, 2007, stock-based compensation was accounted for under SFAS 123(R),
"Share-Based Payment". The amounts in the tables above include stock-based
compensation as follows:
Three Months Six
Months
Ended
Ended
-----------------------------
March March March March
29, 31, 29,
31,
2008 2007 2008 2007
----------------------------Cost of license revenue
$ 14 $19 $14
$40
Cost of service revenue 2,222
1,768 4,569 3,678
Sales and marketing
2,936 2,326 5,803 3,891
Research and development 2,337 1,629
4,607 3,471
General and administrative 3,420 3,105
6,539 6,397
-----------------------------
Total stock-based
compensation
$10,929 $8,847 $21,532 $17,477
=============================
PARAMETRIC TECHNOLOGY CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Six Months
Ended
Ended
------------------ ------------------
March March March
March
29, 31,
29, 31,
2008 2007 2008
2007
------------------ ------------------
GAAP revenue $257,793
$228,096 $499,035 $449,763
Fair value adjustment of
acquired CoCreate deferred
maintenance revenue 1,705
-- 2,942
--
------------------ ------------------
Non-GAAP revenue 259,498 $228,096
$501,977 $449,763
================== ==================
GAAP operating income$ 31,032 $ 21,259 $ 45,897 $ 42,242
Fair value adjustment of
acquired CoCreate deferred
maintenance revenue 1,705
-- 2,942
--Stock-based compensation 10,929 8,847 21,532
17,477
Amortization of acquired
intangible assets included
in cost of license revenue
4,607 1,880 7,561
3,167
Amortization of acquired
intangible assets included
in cost of service revenue 17 17
34 49
Amortization of acquired
intangible assets 4,315 1,588
7,208 3,676
In-process research and
development
-- --
1,887 --
Restructuring charge 1,892 --
11,577 --
------------------ ------------------
Non-GAAP operating
income
$ 54,497 $ 33,591 $ 98,638 $ 66,611
================== ==================
GAAP net income $ 18,848 $ 17,399
$ 28,728 $ 32,552
Fair value adjustment of
acquired CoCreate deferred
maintenance revenue 1,705 --
2,942 --
Stock-based
compensation 10,929
8,847 21,532 17,477
Amortization of acquired
intangible assets included
in cost of license
revenue
4,607 1,880 7,561
3,167
Amortization of acquired
intangible assets included
in cost of
service revenue 17
17 34
49
Amortization of acquired
intangible assets 4,315 1,588
7,208 3,676
In-process research and
development
-- --
1,887 --
Restructuring charge,
net
1,892 --
11,577 --
Income tax
adjustments (2) (6,571)
(1,523) (14,647) (1,875)
------------------ ------------------
Non-GAAP net income
$ 35,742 $ 28,208 $ 66,822 $ 55,046
================== ==================
GAAP diluted earnings per
share
$ 0.16 $ 0.15 $ 0.24 $
0.28
Stock-based
compensation
0.09 0.08 0.18
0.15
All other items identified
above
0.05 0.01 0.15
0.04
------------------ ------------------
Non-GAAP diluted earnings per
share
$0.30 $0.24 $0.57
$0.47
================== ==================
Weighted average shares used
in calculating
Non-GAAP diluted earnings
per share
117,247 117,486 117,667 117,384
(2) Reflects the tax effect of non-GAAP adjustments above.
PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Six Months
Ended
Ended
----------------- -------------------
March March March
March
29, 31,
29, 31,
2008 2007
2008 2007
----------------- -------------------
Cash flows from operating
activities:
Net income $ 18,848 $
17,399 $28,728 $32,552
Stock-based
compensation 10,929
8,847 21,532 17,477
Depreciation and
amortization 14,913
9,687 26,848 19,223
In process research and
development
-- --
1,887 --
Accounts
receivable
31,451 23,034 69,551
14,732
Accounts payable and
accruals(3) (133)
6,550 (30,252) (21,054)
Deferred revenue 38,133 35,899
21,716 21,004
Other
(6,892) (8,955) (12,206) (7,811)
----------------- --------------------
Net cash provided by operating
activities 107,249
92,461 127,804 76,123
Capital expenditures (5,877) (6,048) (10,707)
(12,393)
Acquisitions of businesses,
net of cash
acquired (4)
693 -- (261,592)
(17,639)
Proceeds (payments) from
debt, net (52,358)
-- 152,642
--
Repurchases of
common stock (22,009)
-- (22,009) --
Other investing and
financing activities (296) 2,141
(7,242) 4,353
Foreign exchange impact on
cash
16,756 2,132 16,779
4,135
----------------- -------------------
Net change in cash and cash
equivalents 44,158
90,686 (4,325) 54,579
Cash and cash equivalents,
beginning
of period
214,788 147,341 263,271 183,448
----------------- -------------------
Cash and cash equivalents,
end of period $ 258,946 $238,027
$258,946 $238,027
3) Includes accounts payable, accrued expenses, and accrued compensation
and benefits.
(4) Acquisitions of businesses:
a. The first six months of 2008 includes $248 million for our acquisition
of CoCreate and $14 million for two other acquisitions, net of cash
acquired.
b. The first six months of 2007 includes $16 million for our acquisition
of ITEDO, net of cash acquired, and $2 million of contingent purchase price
earned in the first quarter of 2007 related to our 2006 acquisition of
certain assets and liabilities of Cadtrain, Inc.
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Source: Material used in press releases is often supplied by external
sources and used as is.
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