Oct 28 - PTC Q4 Revenue Down 18% to $246M, Profit Drops to $16M

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PTC Q4 Revenue Down 19% to $246M, Profit Drops to $16M

NEEDHAM, MA, Oct 28, 2009 - PTC (Nasdaq: PMTC), The Product Development Company, today reported results for its fourth fiscal quarter and full fiscal year ended September 30, 2009.

Highlights

Q4 Results: Revenue of $246.3 million and non-GAAP EPS of $0.30
Non-GAAP operating margin of 18.4%; GAAP operating margin of 6.2%
GAAP EPS of $0.13, including $6.3 million restructuring charge to reduce operating expenses
Relative to Q4 guidance, currency was favorable to revenue by approximately $1.6 million and unfavorable to expenses by approximately $0.7 million
FY’09 Results: Revenue of $938.2 million and non-GAAP EPS of $0.80
Non-GAAP operating margin of 12.9%; GAAP operating margin of 2.1%
GAAP EPS of $0.27, including $22.7 million in restructuring charges to reduce operating expenses
FY 2010 Targets: Revenue of approximately $980 million and non-GAAP EPS of approximately $0.96
Non-GAAP operating margin of approximately 15%; GAAP operating margin of approximately 7%
GAAP EPS of approximately $0.43
Assumes $1.46 USD / EURO
Q1 Guidance: Revenue of $230 to $240 million and non-GAAP EPS of $0.12 to $0.18
GAAP EPS of ($0.02) to $0.04
Assumes $1.46 USD / EURO

The Q4 non-GAAP results exclude a $6.3 million restructuring charge, $14.6 million of stock-based compensation expense, $9.2 million of acquisition-related intangible asset amortization and $10.3 million of income tax adjustments. The Q4 results include a non-GAAP tax rate of 21% and a GAAP tax benefit rate of 7%.

The FY’09 non-GAAP results exclude a $22.7 million restructuring charge, $43.3 million of stock-based compensation expense, $35.6 million of acquisition-related intangible asset amortization and acquired in-process research and development expenses and $39.6 million of income tax adjustments. The FY’09 results include a non-GAAP tax rate of 21% and a GAAP tax benefit rate of 84%.

Results Commentary & Outlook

C. Richard Harrison, chairman and chief executive officer, commented, “We exit fiscal 2009 on solid financial footing with a product portfolio that has never been in better shape. Our decision to invest in R&D through the downturn is paying off as we are seeing some very encouraging signs of market momentum, especially as it relates to our Windchill product suite.”

“Our constant currency non-GAAP FY’09 revenue was down 9% compared to last year,” continued Harrison. “While license revenue was down 34%, maintenance and services revenue were up 3% and 1%, respectively, highlighting the stability of our business model and the support of a solid customer base. We are continuing to see positive sequential data points: 1) we again delivered license revenue growth in all of our major geographies except Japan, 2) we had better license and total revenue in North America than we did in Q4’08, which was PTC’s best revenue quarter ever, 3) we won 2 additional strategically important “domino” accounts, and 4) we also had a number of other large Windchill competitive wins during Q4.”

“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 AVIC, Carrier, Deere & Company, General Atomics, Ingersoll Rand, ITT Corporation, and Stryker.”

James Heppelmann, president and chief operating officer added, “We remain focused on expanding and leveraging our technology leadership position. We have significant further enhancements underway for Windchill, Pro/ENGINEER, Arbortext, Windchill ProductPoint, and our other core products. We also continue to add to the breadth of our portfolio with future enhancements to our social product development initiative and our product analytics platform, which we launched in FY’09, and remain on target to launch our embedded software and program portfolio management platforms in FY’10. 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 committed to our goal of 20% non-GAAP EPS growth for 2010 and beyond.”

Neil Moses, chief financial officer, commented, “Our Q4 operating margins and EPS were stronger than expected primarily due to stronger than expected license revenue. Our balance sheet remains solid with $235 million of cash, up from $231 million in Q3 primarily due to strong license sales. We also have an additional $172 million available on our revolving credit facility.”

“Looking forward to FY’10, we are establishing a revenue target of $980 million and a non-GAAP EPS target of $0.96,” continued Moses. “We expect that the actions we took in FY’09 to right-size our business to the current economic conditions, partially offset by some incremental investment in the business in FY’10 in support of our long-term growth objectives, will allow us to improve our non-GAAP operating margin to approximately 15%.” The GAAP EPS target for FY’10 is $0.43.

“For Q1 we are initiating guidance of $230 to $240 million in revenue with non-GAAP EPS of $0.12 to $0.18,” Moses added. The Q1 guidance assumes a non-GAAP tax rate of 23%, a GAAP tax rate of 21% and 121 million diluted shares outstanding. The Q1 non-GAAP guidance excludes approximately $14 million of stock-based compensation expense, $9 million of acquisition-related intangible asset amortization expense and the related income tax effects.

The FY’10 target assumes a non-GAAP tax rate of 23%, a GAAP tax rate of 21% and 119 million diluted shares outstanding. The FY’10 non-GAAP guidance excludes approximately $49 million of stock-based compensation expense, $35 million of acquisition-related intangible asset amortization and the related income tax effects.

Q4 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.

When: Wednesday, October 28, 2009 at 8:30 a.m. Eastern Time
Dial-in: 1-888-566-8560 or 1-517-623-4768 Call Leader: Richard Harrison with 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 p.m. (CT) on November 2, 2009 at 1-866-463-2193 or 1-203-369-1378. To access the replay via webcast, please visit www.ptc.com/for/investors.htm.

FY’10 Investor Day and Webcast

PTC willhost its FY’10 Investor Day on Tuesday, November 3, 2009 from 10:00am to 3:00pm (ET). This event will be held at the Grand Hyatt New York Hotel, Park Ave at Grand Central. To register, please contact Sharon Feintuck at 781-370-6909 or sfeintuck@ptc.com.

When: Tuesday, November 3, 2009, from 10:00am to 3:00pm (ET)
Where: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=116312&eventID=2492231
Replay: The presentation will be archived for public replay until November 6, 2009 at 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 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. 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.

About PTC

PTC (Nasdaq: PMTC) provides discrete manufacturers with software and services to meet the globalization, time-to-market and operational efficiency objectives of product development. Using the company’s PLM and CAD solutions, organizations in the Industrial, High-Tech, Aerospace and Defense, Automotive, Consumer and Medical industries are able to support key business objectives and create innovative products that meet customer needs and comply with industry regulations. For more information, visit www.ptc.com.

See Also

PTC Conference Call Notes new - Dassault deal, sales, hiring overseas, economic recovery, Ralph Grabowski, WorldCAD Access, Oct 29, 2009
Parametric Technology Corporation Q4 Results Call Transcript new - Seeking Alpha, Oct 28, 2009

------------------

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

                               Three Months Ended         Year Ended
                              Sept 30,     Sept 30,    Sept 30,   Sept 30,
                                2009        2008        2009        2008

Revenue:

License $70,688 $103,632 $212,710 $332,380
Service 175,655 195,915 725,475 737,950

Total revenue 246,343 299,547 938,185 1,070,330

Costs and expenses:
Cost of license revenue(1)      7,758        9,560      29,962     30,123
Cost of service revenue(1)     65,592       79,226     279,797    300,663
Sales and marketing(1)         76,297       83,731     301,369    306,880
Research and development(1)    48,826       47,366     188,501    182,022
General and administrative(1) 22,295       23,176      80,670     87,829
Amortization of acquired
intangible assets               4,110        4,327      15,620     15,579
In-process research and
development                      --           --          300       1,887
Restructuring charges           6,274        4,735      22,671     20,102
Total costs and expenses      231,152      252,121     918,890    945,085
Operating income               15,191       47,426      19,295    125,245
Other expense, net              (312)        (500)     (2,124)    (6,359)
Income before income taxes     14,879       46,926      17,171    118,886
Provision for (benefit from)
income taxes                   (1,021)      10,422     (14,351)    39,184

Net income $15,900 $36,504 $31,522 $79,702

Earnings per share:
Basic                         $0.14        $0.32       $0.27      $0.70
   Weighted average shares
   outstanding                115,288      113,829     114,950    113,703
Diluted                       $0.13        $0.31       $0.27      $0.68
   Weighted average shares
   outstanding                119,379      118,780     117,359    117,870

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

                                 Three Months Ended        Year Ended
                                  Sept 30,   Sept 30    Sept 30, Sept 30
                                   2009       2008        2009     2008

Cost of license revenue            $22         $12        $50       $38
Cost of service revenue           2,562      2,305      8,163     9,172
Sales and marketing               4,205      3,296     12,797    12,229
Research and development          2,404      2,500      8,214     9,429
General and administrative        5,362      3,602     14,104    13,528

Total stock-based compensation $14,555 $11,715 $43,328 $44,396

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

                                 Three Months Ended        Year Ended
                                Sept 30,    Sept 30,   Sept 30,   Sept 30
                                 2009         2008      2009       2008

GAAP revenue $246,343 $299,547 $938,185 $1,070,330

   Fair value adjustment of
acquired CoCreate deferred
maintenance revenue             --          668        --       4,588
Non-GAAP revenue               $246,343    $300,215   $938,185 $1,074,918

GAAP operating income $15,191 $47,426 $19,295 $125,245

Fair value adjustment of
acquired CoCreate deferred
maintenance revenue -- 668 -- 4,588
Stock-based compensation 14,555 11,715 43,328 44,396

   Amortization of acquired
   intangible assets included
   in cost of license revenue     5,082       5,991     19,674    19,841
   Amortization of acquired
   intangible assets included
   in cost of service revenue      --          16         8         67

Amortization of acquired
intangible assets                 4,110       4,327     15,620    15,579
In-process research and development --          --         300     1,887
Restructuring charges             6,274       4,735     22,671    20,102

Non-GAAP operating income $45,212 $74,878 $120,896 $231,705

GAAP net income $15,900 $36,504 $31,522 $79,702

Fair value adjustment of
acquired CoCreate deferred
maintenance revenue -- 668 -- 4,588

Stock-based compensation 14,555 11,715 43,328 44,396

Amortization of acquired
intangible assets included
in cost of license revenue 5,082 5,991 19,674 19,841

Amortization of acquired
intangible assets included
in cost of service revenue -- 16 8 67

Amortization of acquired
intangible assets 4,110 4,327 15,620 15,579

In-process research and
development -- -- 300 1,887

Restructuring charges 6,274 4,735 22,671 20,102

One-time non-cash loss included
in other expense, net (2) -- -- -- 6,206
Income tax adjustments (3) (10,308) (9,984) (39,552) (32,355)

Non-GAAP net income $35,613 $53,972 $93,571 $160,013

GAAP diluted earnings per share $0.13       $0.31      $0.27       $0.68
Stock-based compensation          0.12        0.10       0.37       0.38
All other items identified above 0.05        0.04       0.16       0.30

Non-GAAP diluted earnings
per share $0.30 $0.45 $0.80 $1.36

Weighted average shares
outstanding – diluted 119,379 118,780 117,359 117,870

(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 a $7.6 million one-time tax benefit recorded in the second quarter of 2009 due to the recognition of deferred tax assets in a foreign jurisdiction.

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

Sept 30 Sept 30,
2009 2008

ASSETS

Cash and cash equivalents                   $235,122         $256,941
Accounts receivable, net                     166,591          201,509
Property and equipment, net                   58,105           55,253
Goodwill and acquired intangibles, net       596,517          587,537
Other assets                                 293,877          248,333

Total assets $1,350,212 $1,349,573

LIABILITIES AND STOCKHOLDERS' EQUITY

Deferred revenue                            $234,270         $258,295
Borrowings under revolving credit facility    57,880           88,505
Other liabilities                            296,481          300,248
Stockholders' equity                         761,581          702,525

Total liabilities and stockholders' equity $1,350,212 $1,349,573

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

                                   Three Months Ended       Year Ended
                                  Sept 30    Sept 30    Sept 30, Sept30
                                    2009       2008       2009     2008

Cash flows from operating activities:

Net income                        $15,900    $36,504    $31,522 $79,702
Stock-based compensation           14,555     11,715     43,328   44,396
Depreciation and amortization      16,052     16,537     61,610   60,021
Accounts receivable               (10,566)   (27,813)    56,889   42,006
Accounts payable and accruals(4)   10,705     15,915    (19,281) (13,240)
Deferred revenue                  (24,556)   (14,228)   (27,256)   2,077 In-process research and development --         --        300      1,887
Income taxes                      (13,329)     2,933    (66,700)   4,578
Other                              (3,288)      (429)     2,358      813
Net cash provided by
operating activities                5,473     41,134     82,770   222,240
Capital expenditures               (6,278)    (4,947)   (30,087) (25,439)
Acquisitions of businesses,
net of cash acquired (5)             --         --      (32,790) (261,592)
Proceeds from (payments on)
debt, net                            --      (10,860)   (31,951)   88,139
Repurchases of common stock        (4,576)      --      (14,157) (27,297)
Other investing and financing
activities                          2,256      4,928        562     1,615
Foreign exchange impact on cash     6,902    (15,334)     3,834    (3,996)   Net change in cash and cash
equivalents                         3,777     14,921    (21,819)   (6,330)
Cash and cash equivalents,
beginning of period               231,345    242,020    256,941   263,271
Cash and cash equivalents,
end of period                    $235,122   $256,941   $235,122 $256,941

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

(5) Acquisitions of businesses:

a. The third quarter of 2009 includes $24 million for our acquisition of Relex, net of cash acquired.

b. The first quarter of 2009 includes $7 million for our acquisition of Synapsis and $1 million for a contingent purchase price earned during the quarter related to a prior acquisition.

c. The first quarter of 2008 includes $248 million for our acquisition of CoCreate and $14 million for two other acquisitions, net of cash acquired.

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See Also

PTC website

TenLinks Pro/E directory - by TenLinks.com
Pro/E Reading Room - features, reviews, tutorials and more by CADdigest.com

Additional News

Source: Material used in press releases is often supplied by external sources and used as is.