Investor Contact: Media Contact:
Meredith Mendola Nicole Rowe
781-370-6151 781-370-6369
mmendola@ptc.com nrowe@ptc.com
PTC Reports Fourth Quarter and Fiscal Year 2005 Results
- Company Delivers 15% Year-Over-Year Revenue Growth in the Fourth Quarter;
9% Revenue Growth for the Fiscal Year -
NEEDHAM, Mass., November 2, 2005 - PTC (Nasdaq: PMTC), the Product Development
Company(TM), today reported revenue of $195.1 million for the fourth fiscal
quarter ended September 30, 2005, up 15% from $170.1 million for the same period
last year. The growth was driven by a combination of strong organic growth as
well as the addition of revenue from Arbortext, which PTC acquired during the
quarter. For the fiscal year, revenue grew 9% to $720.7 million, compared to
$660.0 million in fiscal 2004.
"2005 was a great year for PTC," said C. Richard Harrison, president and chief
executive officer. "We exceeded our goals for organic revenue growth and also
expanded our business through strategic acquisition. We strengthened our ability
to serve existing customers with new product and service offerings. And we
leveraged our own solutions as well as those we acquired to enter new markets,
such as Retail, Footwear & Apparel, and Life Sciences."
As previously announced, PTC adopted FAS 123(R) during the fourth quarter, which
requires the expensing of stock-based compensation. Additionally, as previously
announced, commencing with fourth quarter 2005 results, PTC has begun to provide
a non-GAAP income statement to supplement its GAAP income statement.
Accordingly, earnings and expense results are provided below on both a GAAP and
a non-GAAP basis, and we have provided a reconciliation between GAAP and
non-GAAP results in the attached financial tables.
GAAP net income for the fourth quarter was $17.3 million, or $0.06 per diluted
share, compared with GAAP net income of $42.0 million, or $0.15 per diluted
share, in the year-ago period. Non-GAAP net income, which excludes restructuring
charges, stock-based compensation, acquisition-related amortization, in-process
research and development, and their related tax effects, as well as the effect
of one-time tax items, was $24.6 million for the fourth quarter, or $0.09 per
diluted share, compared to $25.4 million in the year-ago period, or $0.09 per
diluted share.
For the fiscal year, GAAP net income was $83.6 million, or $0.30 per diluted
share, compared to $34.8 million, or $0.13 per diluted share, in fiscal 2004.
Non-GAAP net income was $87.2 million, or $0.31 per diluted share, compared to
$61.1 million, or $0.22 per diluted share, in fiscal 2004. Cash and investments
were $204.4 million at the end of the fourth quarter, down from $403.0 million
at the end of the third quarter, reflecting the cost of the Arbortext
acquisition ($190 million) and the employee stock option buyback ($12.7
million).
Revenue Metrics
With the acquisition of Arbortext and the launch of Pro/INTRALINK 8.0, PTC has
begun to classify its revenue into two new categories:
o "Desktop Solutions", which includes Pro/ENGINEER, Arbortext Editor
and all other solutions that help companies create content and
improve desktop productivity. In the commentary below, this category
is compared to the revenue category formerly called Design Solutions.
o "Enterprise Solutions", which includes Windchill, Pro/INTRALINK,
Arbortext Publishing Engine and all other solutions that help
companies collaborate, manage and publish information across an
extended enterprise. In the commentary below, this category is
compared to the revenue category formerly called Collaboration and
Control Solutions.
Total Desktop Solutions revenue for the fourth quarter was $129.3 million, which
includes $37.8 million of license revenue. Both license revenue and total
revenue grew 6% from the year-ago period. For fiscal year 2005, PTC delivered
total Desktop Solutions revenue of $503.1 million, up 5% from fiscal 2004.
Total Enterprise Solutions revenue grew 37% in the fourth quarter to $65.8
million from $47.9 million in the fourth quarter of 2004. Enterprise Solutions
license revenue was $23.0 million, up 40% from $16.4 million in the year-ago
period. For the fiscal year 2005, PTC delivered total Enterprise Solutions
revenue of $217.6 million, or 21% growth from fiscal 2004.
Revenue growth in both categories reflects organic growth as well as growth
through acquisition, primarily from the contribution of Arbortext, which PTC
acquired on July 19, 2005.
In the fourth quarter, PTC received orders from leading organizations, including
AGCO Corporation, Alion Science and Technology Corporation, Boeing Company,
Casio Hitachi Mobile Communications Co., Ltd., Fila USA Inc., Hino Motors, Ltd.,
Mitsubishi Electric Engineering Co., Ltd., NASA, Naval Reactors Program
(U.S. Navy), Northrop Grumman Corporation, Novellus Systems Inc., Pfizer Inc.,
Siemens VDO Automotive AG, Turbomeca SA, and Volkswagen AG. PTC's reseller
channel delivered $34.8 million in total revenue during the quarter. For the
fiscal year, PTC's channel delivered $138.6 million in total revenue.
"We are executing very well and are in a position to deliver accelerated revenue
growth in 2006," continued Harrison. "We have articulated a highly
differentiated vision with our integral product development system. Our
solutions are unmatched in breadth, ease-of-use and ease-of-deployment, and we
are building momentum in new and existing accounts of all sizes. We are
enthusiastic about our outlook as a result, and we are poised to deliver 12%
revenue growth in 2006."
First Quarter and Fiscal Year 2006 Financial Outlook
PTC's revenue forecast for the first quarter of fiscal 2006 is between $190
million and $195 million. On a GAAP basis, first quarter total costs and
expenses are expected to be approximately $177 million to $182 million, and
earnings per share are expected to be between $0.02 and $0.04. Total non-GAAP
first quarter operating costs are expected to be approximately $165 million to
$170 million. The Company expects non-GAAP first quarter earnings per share to
be between $0.06 and $0.08. These non-GAAP operating cost and earnings
expectations exclude the following first quarter estimated expenses:
o Approximately $10 million of expense related to stock-based
compensation. This expense is slightly higher than previously expected
because the Company has decided to implement a mix of
performance-based and time-based equity incentive plans. PTC
previously used only time-based equity incentives, which carry a lower
initial accounting expense than do performance-based equity
incentives.
o Approximately $2 million of acquisition-related amortization expense.
For the fiscal year ending September 30, 2006, PTC expects revenue to be between
$805 and $815 million. On a GAAP basis, fiscal year 2006 earnings per share are
expected to be between $0.18 and $0.20. The Company expects non-GAAP earnings
per share to be between $0.35 and $0.37 for the fiscal year. These non-GAAP
earnings expectations exclude the following full-year estimated expenses:
o Approximately $40 million of expense related to stock-based
compensation.
o Approximately $9 million of acquisition-related amortization expense.
Other Important Information
Separately, PTC has identified irregularities in certain sales orders in the
Asia-Pacific region, principally related to PTC's 2001-2003 fiscal years. The
orders identified are not material to the results for these fiscal years, but
PTC's investigation has not been completed. PTC expects to complete its
investigation in time for the filing of its Annual Report on Form 10-K in
December.
Important Information about Non-GAAP References
References by the Company to non-GAAP operating costs and non-GAAP earnings per
share refer to costs and expenses or earnings per share excluding stock-based
compensation cost, amortization of acquisition-related intangible assets,
in-process research and development write-offs associated with acquisitions,
restructuring charges, and their related tax effects, as well the effect of
one-time tax items, if any. GAAP requires that these costs and charges be
included in costs and expenses and accordingly used to determine operating
income (loss) and earnings per share. The Company's management uses non-GAAP
operating costs, and associated non-GAAP net income (which is the basis for
non-GAAP earnings per share) to make operational and investment decisions, and
the Company believes that they are among several useful measures for an enhanced
understanding of our operating results for a number of reasons.
First, excluding the stock-based compensation cost from GAAP operating income
enables management and investors to perform a meaningful comparison of the
Company's operating results to prior periods. In these prior periods, the
Company's GAAP financial results were not required to include expense associated
with stock-based compensation, and now these expenses will be distributed among
the functional expense line items in the GAAP presentation. Second, although the
Company undertakes analyses to ensure that its stock-based compensation grants
are in line with peer companies and do not unduly dilute shareholders, the
Company allocates these grants and measures them at the corporate level.
Management excludes their financial statement effect when planning or measuring
the periodic financial performance of the Company's functional organizations
since they are episodic in nature and unrelated to our core operating metrics.
Likewise, we believe that excluding items such as in-process R&D write-offs and
amortization of intangible assets associated with acquisitions, or restructuring
charges that are not directly attributable to our ongoing operations and that do
not generally fluctuate in correlation with periodic performance, provides
investors with information that helps to compare period-over-period operating
performance by highlighting the effect of the acquisitions or restructuring
activities on our results of operations. In addition, the Company's management
excludes the financial statement effect of these items in creating operating
budgets for the Company's functional business units and in evaluating and
compensating employees due to the fact that it is difficult to forecast these
expenses. Lastly, we believe that providing non-GAAP earnings per share affords
investors a view of earnings that may be more easily compared to peer companies
and enables investors to consider the Company's earnings on both a GAAP and
non-GAAP basis in periods when the Company is engaged in acquisition activities
or undertaking non-recurring activities.
The Company believes these non-GAAP measures will aid investors' overall
understanding of the Company's results by providing a higher degree of
transparency for certain expenses, and providing a level of disclosure that will
help investors understand how the Company plans and measures its own business.
However, non-GAAP net income (loss) should be construed neither as an
alternative to GAAP net income (loss) or earnings (loss) per share as an
indicator of our operating performance nor as a substitute for cash flow from
operations as a measure of liquidity because the items excluded from the
non-GAAP measures often have a material impact on the Company's results of
operations. Therefore, management uses, and investors should use, non-GAAP
measures in conjunction with our reported GAAP results.
Earnings Call Webcast
The Company will provide detailed financial information and an outlook update on
its fourth quarter and fiscal year 2005 results conference call and live webcast
on November 2, 2005 at 10 a.m. ET. This earnings press release and accompanying
financial and operating statistics will be accessible prior to the conference
call and webcast on the Company's web site at www.ptc.com/for/investors.htm. In
addition, the live webcast may be accessed at the same Web address. To access
the live call, please dial 1-888-566-8560 (in the U.S.) or +1-517-623-4768
(international). Please use passcode PTC. A replay of the call will be available
until 5:00 p.m. ET on November 7, 2005. To access the replay via webcast, please
visit www.ptc.com/for/investors.htm. To access the replay by phone, please dial
402-220-9726.
The Company's unaudited consolidated statements of operations, the unaudited
condensed consolidated balance sheets, and the unaudited condensed consolidated
statements of cash flows for the fourth quarter and fiscal year 2005 are
attached.
About PTC
PTC (Nasdaq: PMTC) provides leading product lifecycle management (PLM), content
management and dynamic publishing solutions to more than 40,000 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 500 and Russell 2000 indices. For more information on
PTC, please visit http://www.ptc.com.
Statements in this news release that are not historical facts, including
statements about our confidence and strategies and our expectations about
revenue, results of operations, and market acceptance of our products, are
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those projected. Those risks and
uncertainties include the following: the financial results for the fourth
quarter and the full year of fiscal 2005 are reported herein on an unaudited
basis and are subject to adjustments as part of the audit process; we may be
unable to conclude the investigation in the Asia Pacific region as described
above in time for the filing of our Annual Report on Form 10-K by the date it is
due and our reported results could change as a result of that investigation; the
PLM market is relatively new and may not grow at the rate we expect; we may be
unable to capture market share by differentiating our product and service
offerings from those of our competitors; expanding our technology footprint and
augmenting our product lines may not generate expected additional sales or
revenues; we may be unable to successfully complete the acquisitions of
strategic businesses and any businesses we have acquired or acquire may not
generate the revenues and earnings we expected; we may be unable to successfully
develop and integrate the technologies and the businesses we have acquired or
may acquire in order to offer integrated solutions that complement PTC's product
development system; we may be unable to retain and maintain relationships with
key employees, customers and other strategic partners, including those within
markets and vertical industries with which PTC has little experience; we may be
unable to undertake our strategic initiatives while controlling increases in our
operating cost structure; the IT spending environment may not continue to
improve or may not improve at the rate we expect; as well as other risks and
uncertainties detailed from time to time in reports we file with the Securities
and Exchange Commission, including our most recent reports on Forms 10-K and
10-Q.
PTC, The Product Development Company, Pro/ENGINEER, Wildfire, Windchill,
Pro/INTRALINK, Arbortext, and all 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 and products
referenced herein have trademarks or registered trademarks of their respective
holders.
PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended Year Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
---------------------------- ----------------------------
Revenue:
License $ 60,862 $ 51,967 $ 209,717 $ 198,860
Service 134,230 118,167 511,002 461,169
---------------------------- ----------------------------
Total revenue 195,092 170,134 720,719 660,029
---------------------------- ----------------------------
Costs and expenses:
Cost of license revenue(1) 3,499 1,933 8,444 8,234
Cost of service revenue(1) 55,387 41,501 199,798 173,941
Sales and marketing(1) 69,106 55,500 243,758 226,054
Research and
development(1) 35,392 25,383 118,267 107,992
General and
administrative(1) 19,749 15,571 63,605 58,264
Amortization of other
intangible assets 968 1,223 1,638 5,195
In-process research
and development 730 - 730 -
Restructuring and
other charges (1,307) 1,085 (1,307) 42,933
---------------------------- ----------------------------
Total costs and
expenses 183,524 142,196 634,933 622,613
---------------------------- ----------------------------
Operating income 11,568 27,938 85,786 37,416
Other income (expense),
net 1,300 236 5,526 (377)
---------------------------- ----------------------------
Income before income
taxes 12,868 28,174 91,312 37,039
Provision for (benefit
from) income taxes (4,407) (13,870) 7,720 2,226
----------------------------- ----------------------------
Net income $ 17,275 $ 42,044 $ 83,592 $ 34,813
============================= ============================
Earnings per share:
Basic $ 0.06 $ 0.16 $ 0.31 $ 0.13
Weighted average
shares outstanding 272,320 269,001 271,339 267,704
Diluted $ 0.06 $ 0.15 $ 0.30 $ 0.13
Weighted average
shares outstanding 280,667 275,180 279,952 273,183
(1) Effective July 3, 2005, PTC adopted FAS 123(R), "Share-Based Payment".
Accordingly, for the three months ended September 30, 2005, stock-based
compensation was accounted under FAS 123(R) while, for the nine months
ended July 2, 2005 and three months and year ended September 30, 2004,
stock-based compensation was accounted under APB No. 25 "Accounting for
Stock Issued to Employees." The amounts in the tables above include
stock-based compensation as follows:
Three Months Ended Year Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
---------------------------- ----------------------------
Cost of license revenue $ 61 $ - $ 61 $ -
Cost of service revenue 2,645 - 2,645 -
Sales and marketing 5,113 - 5,113 -
Research and development 3,467 - 3,467 -
General and
administrative 3,925 - 3,925 -
---------------------------- ----------------------------
Total stock-based
compensation $ 15,211 $ - $ 15,211 $ -
============================= ============================
<page>
PARAMETRIC TECHNOLOGY CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
Three Months Ended Year Ended
-----------------------------------------------------------
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
-----------------------------------------------------------
GAAP net income $ 17,275 $ 42,044 $ 83,592 $ 34,813
Stock-based compensation 15,211 - 15,211 -
Amortization of other
intangible assets included
in cost of license revenue 619 - 646 -
Amortization of other
intangible assets 968 1,223 1,638 5,195
In-process research
and development 730 - 730 -
Restructuring and
other charges (1,307) 1,085 (1,307) 42,933
Provision for income
taxes (2) (8,928) (18,930) (13,344) (21,809)
-----------------------------------------------------------
Non-GAAP net income $ 24,568 $ 25,422 $ 87,166 $ 61,132
===========================================================
GAAP diluted
earnings per share $ 0.06 $ 0.15 $ 0.30 $ 0.13
Stock-based compensation 0.05 - 0.05 -
All other items
identified above (0.02) (0.06) (0.04) 0.09
-----------------------------------------------------------
Non-GAAP diluted
earnings per share $ 0.09 $ 0.09 $ 0.31 $ 0.22
===========================================================
Weighted average shares
used in calculating
non-GAAP diluted net
earnings per share (3) 283,355 275,180 280,624 273,183
(2) The provision for income taxes eliminates one-time tax benefits of $7.7
million and $12.1 million in the fourth quarter and full year of 2005,
respectively, and $18.9 million in both the fourth quarter and full year of
2004, and also records the tax effect of the non-GAAP adjustments. The tax
effect of non-GAAP adjustments is $1.2 million for both the fourth quarter
and full year of 2005, and $0.0 million and $2.9 million for the fourth
quarter and full year of 2004, respectively.
(3) The weighted average shares used in calculating non-GAAP diluted earnings
per share for the fourth quarter and full year 2005, respectively, includes
2.7 million and 0.7 million additional shares related to outstanding stock
options assumed repurchased under SFAS 123(R) that would not be considered
repurchased under APB No. 25.
PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, September 30,
2005 2004
----------------- ------------------
ASSETS
Cash and investments $ 204,423 $ 294,887
Accounts receivable, net 147,497 130,393
Property and equipment, net 52,551 55,780
Goodwill and other intangibles, net 258,838 56,543
Other assets 123,314 138,737
----------------- ------------------
Total assets $ 786,623 $ 676,340
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred revenue $ 200,467 $ 176,664
Other liabilities 262,312 257,725
Stockholders' equity 323,844 241,951
----------------- ------------------
Total liabilities and stockholders' equity $ 786,623 $ 676,340
================= ==================
PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended Year Ended
---------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
---------------------------- ----------------------------
Cash flows from
operating activities:
Net income $ 17,275 $ 42,044 $ 83,592 $ 34,813
Stock-based
compensation 15,211 - 15,211 -
Depreciation and
amortization 7,571 8,077 26,136 35,594
Other (30,246) (10,501) 4,317 30,929
---------------------------- ----------------------------
Net cash provided by
operating activities 9,811 39,620 129,256 101,336
Capital expenditures (3,401) (4,839) (16,135) (12,448)
Acquisition of
businesses (192,087) - (198,897) (9,822)
Other investing and
financing activities (11,610) 4,495 (3,135) 9,712
Foreign exchange impact
on cash (1,298) (2,130) (1,553) 797
---------------------------- ----------------------------
Net change in cash
and investments (198,585) 37,146 (90,464) 89,575
Cash and investments,
beginning of period 403,008 257,741 294,887 205,312
---------------------------- ----------------------------
Cash and investments,
end of period $ 204,423 $ 294,887 $ 204,423 $ 294,887
============================ ============================