PTC Announces Q4 Results, Initiates FY’11 Targets and Q1 Guidance
Targets 20% to 25% license revenue growth in FY’11
NEEDHAM, Mass.— October 26, 2010 -- PTC (Nasdaq: PMTC), The Product Development Company®, today reported results for its year end and fourth fiscal quarter ended September 30, 2010.
Highlights
| · | Q4 Results: Revenue of $268 million and non-GAAP EPS of $0.32; GAAP EPS of ($0.11) |
| o | Non-GAAP operating margin of 17.8%; GAAP operating margin of 10.8% |
| o | Relative to Q4 guidance ($255 - $265 million in revenue with $0.30 to $0.32 non-GAAP EPS), currency fluctuations benefitted revenue by $3.7 million and impacted expenses by $2 million for a net benefit to non-GAAP EPS of $0.01 |
| · | FY’10 Results: Revenue of $1,010 million and non-GAAP EPS of $1.00; GAAP EPS of $0.20 |
| o | Non-GAAP operating margin of 15.6%; GAAP operating margin of 7.4% |
| · | Q1 Guidance: Revenue of $255 to $265 million and non-GAAP EPS of $0.22 to $0.26 |
| o | GAAP EPS of $0.11 to $0.15 |
| o | Assumes $1.37 USD / EURO |
| · | FY’11 Targets: Revenue of $1,110 to $1,130 million and non-GAAP EPS of $1.20 to $1.25 |
| o | GAAP EPS of $0.75 to $0.80 |
| o | License revenue growth target of 20% to 25% year-over-year growth |
| o | Non-GAAP operating margin of 17% to18%; GAAP operating margin of 11% to 12% |
The Q4 non-GAAP results exclude $11.3 million of stock-based compensation expense, $7.6 million of acquisition- related intangible asset amortization, $9.0 million of other income resulting from resolution of a litigation matter, and $41.5 million of income tax adjustments. The Q4 non-GAAP results include a tax rate of 20% and 120 million diluted shares outstanding. The Q4 GAAP results include a tax rate of 135% and 115 million diluted shares outstanding.
Results Commentary
James Heppelmann, president and chief executive officer, commented, “Q4 was another solid quarter for PTC with total revenue up 9% year-over-year and license revenue up 26%. Importantly, our services and maintenance revenues were up on a year-over-year basis for the first time since Q2’09. Our PLM license revenue in Q4 was $44.3 million, up 27% year-over-year, continuing to highlight our leadership position in a large and growing segment of the enterprise software market. Our CAD license revenue was $44.7 million, up 25% year-over-year, with growth in every region.” On a constant currency basis total Q4 revenue was up 11% and license revenue was up 27% compared to the year ago period.
“Our continued revenue momentum in the PLM market is further bolstered by an additional 3 strategically important ‘domino’ account wins during Q4 and another one completed early in Q1,” Heppelmann continued. “Since 2009, we have won 19 domino accounts, all of which are large multinational companies who have chosen to standardize their PLM initiatives on our Windchill platform. Dominoes represent the largest of many competitive displacement opportunities, and we believe they are a clear indicator of our momentum in the PLM market. They also demonstrate that PTC is gaining share and becoming recognized as the industry leader for both our technology and product development process expertise. We are further engaged in more than 250 other opportunities world-wide w ith companies that are looking to replace their existing PLM solution to help improve their competitive position in their own markets.”
Heppelmann added, “Our pipeline for new business opportunities with new and existing customers remains strong. During the quarter we recognized revenue from leading organizations such as Bombardier, Bosch, Deere & Company, NASA, Raytheon, Steelcase, the US Army, the US Navy, and Whirlpool.”
Jeff Glidden, chief financial officer, commented, “From a profitability standpoint, while we outperformed our revenue targets, our EPS result was in line with our original guidance due to higher incentive compensation expense. As a result of our over performance, we elected to provide a profit sharing bonus to our employees, who have not received a merit increase in two years given the belt tightening we did as a result of the macro-economic environment.”
(continues)
��We ended the fourth quarter with $240 million of cash,” continued Glidden. “During Q4 we repurchased $2 million worth of our stock. Additionally, we resolved the litigation with GE Japan, which resulted in a GAAP benefit of $9 million to other income in Q4; this resolution will reduce our cash balance by approximately $48 million in Q1’11. Our non-GAAP tax rate was lower than expected during the quarter as a result of lower than expected taxes in several foreign jurisdictions. Additionally, we completed a business realignment initiative during the quarter, primarily in Europe, to simplify our corporate structure for tax efficient cash repatriation. This realignment resulted in a significant non-cash GAAP tax rate increase in Q4.”
Outlook Commentary
“Based on the market momentum we are seeing, the strength of our pipeline, our increased sales capacity, many important product initiatives, including the launches of Windchill 10 and Project Lightning, as well as the significant interest we are seeing in other products such as Arbortext, Relex and InSight, we continue to be excited about our long-term growth opportunity,” said Heppelmann. “Given our 25% year-over-year non-GAAP EPS growth in FY’10 and our expected 20% to 25% year-over-year non-GAAP EPS growth in FY’11, we remain confident and committed to achieving our goal of a 20% non-GAAP EPS CAGR through 2014.”
“Looking to FY’11, we are targeting 10% to 12% revenue growth and 20% to 25% non-GAAP EPS growth,” said Glidden. “We are expecting license revenue growth of approximately 20% to 25%, services revenue growth of approximately 10% and maintenance revenue growth of approximately 5%. The currency assumption embedded in our guidance is $1.37 USD/EURO. We are also establishing a target of having won 30 domino accounts by the end of FY’11, up from 19 currently.”
Glidden continued, “We are expecting non-GAAP operating margin of approximately 17% to 18%. We intend to continue to invest prudently in our business to leverage our technology leadership position and capitalize on our long-term growth opportunity.” For FY’11 the GAAP operating margin target is 11% to 12% and the GAAP EPS target is $0.75 to $0.80.
The FY’11 targets assume a non-GAAP tax rate of 25%, a GAAP tax rate of 25% and 121 million diluted shares outstanding. The FY’11 non-GAAP guidance excludes approximately $43.3 million of stock-based compensation expense, $28.2 million of acquisition-related intangible asset amortization and their related income tax effects.
“For Q1 we are initiating guidance of $255 to $265 million in revenue with non-GAAP EPS of $0.22 to $0.26,” Glidden added. “We are expecting approximately flat to low single digit year-over-year growth in our license revenue in Q1, with our combined services and maintenance businesses essentially flat resulting in flat to low single-digit year-over-year growth in total revenue.” The Q1 GAAP EPS target is $0.11 - $0.15.
The Q1 guidance assumes a non-GAAP tax rate of 25%, a GAAP tax rate of 25% and 121 million diluted shares outstanding. The Q1 non-GAAP guidance excludes approximately $11.0 million of stock-based compensation expense, $7.3 million of acquisition-related intangible asset amortization expense and their related income tax effects.
Q4 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 Q4 Conference Call and Webcast |
| | |
| When: | Wednesday, October 27th, 2010 at 8:30 am (ET) |
| | |
Dial-in: | 1-888-455-2040 or 1-773-799-3949 Call Leader: James Heppelmann 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 (CT) on November 1, 2010 at 1-888-568-0424 or 402-530-7959. To access the replay via webcast, please visit www.ptc.com/for/investors.htm. |
(continues)
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, acquired in-process research and development expense, gain on 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 e xternally, 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. 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 consider, non-GAAP measures in conjunction with our GAAP results.
Forward-Looking Statements
Statements in this press release that are not historic facts, including statements about our fiscal 2011 and other future financial and growth expectations and anticipated tax rates are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. These risks include the possibility that customers may not purchase our solutions when or at the rates we expect, the possibility the foreign currency exchange rates may vary from our expectations and thereby affect our reported revenue and expense, the possibility that we may not achieve the license, services or maintenance growth rates that we expect, which could result in a different mix of revenue between license, service and maintenance and could impact our EPS results, the possibility tha t strategic customer wins may not generate the revenue we expect, the possibility that the launches of Windchill 10 and Project Lightning may not generate the revenue we expect, and the possibility that the launches of Windchill 10 and/or Project Lightning may be delayed. In addition, our assumptions concerning our future GAAP and non-GAAP effective income tax rates are based on estimates and other factors that could change, including the geographic mix of our revenue, expenses (including restructuring charges) and profits and loans and cash repatriations from foreign subsidiaries. Other risks and uncertainties that could cause actual results to differ materially from those projected are detailed from time to time in reports we file with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.
PTC, The Product Development Company, and all other PTC product names and logos are trademarks or registered trademarks of Parametric Technology Corporation or its subsidiaries in the United States and in other countries. All other companies referenced herein are trademarks or registered trademarks of their respective holders.
About PTC (www.ptc.com)
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 and related solutions, organizations in the Industrial, High-Tech, Aerospace/Defense, Automotive, Retail/Consumer and Life Sciences industries are able to support key business objectives such as reducing costs and shortening lead times while creating innovative products that meet customer needs and comply with industry regulations.
(continues)
