PTC Q3 Revenue Up 7% to $243M with $10.7M Profit

NEEDHAM, MA, July 28, 2010 – PTC (Nasdaq: PMTC), The Product Development Company, today reported results for its third fiscal quarter ended July 3, 2010.

Highlights

  • Q3 Results: Revenue of $243.0 million and non-GAAP EPS of $0.21; GAAP EPS of $0.09
    • Non-GAAP operating margin of 13.2%; GAAP operating margin of 4.9%
    • Relative to updated Q3 guidance ($230 – $240 million in revenue with $0.14 to $0.20 non-GAAP EPS), currency fluctuations did not meaningfully impact results
  • Q4 Guidance: Revenue of $255 to $265 million and non-GAAP EPS of $0.30 to $0.32
    • GAAP EPS of $0.20 to $0.22
    • Assumes $1.25 USD / EURO, up from $1.20 assumption in previous guidance, a $3 million positive impact to revenue in Q4 and a $1 million negative impact to expense
  • FY 2010 Targets: Maintaining revenue target of $1 billion and non-GAAP EPS of $1.00
    • GAAP EPS of $0.50
    • Maintaining license revenue growth target of 35% to 40% year-over-year growth
    • Non-GAAP operating margin of 16%; GAAP operating margin of 7.5%

The Q3 non-GAAP results exclude $11.5 million of stock-based compensation expense, $8.5 million of acquisition- related intangible asset amortization and $6.1 million of income tax adjustments. The Q3 results include a non-GAAP tax rate of 22% and a GAAP tax rate of 8%.

Results Commentary

C. Richard Harrison, chairman and chief executive officer, commented, “Q3 was another solid quarter for PTC with total revenue up 7% year-over-year and license revenue up 37%. Our revenue performance was above the high-end of our expectations, driven primarily by continued strength of our PLM business.” On a constant currency basis total Q3 revenue was up 8% and license revenue was up 39% compared to the year ago period.

“Our PLM license revenue in Q3 was $36.5 million, up 63% year-over-year, continuing to highlight our leadership position in a large and growing segment of the enterprise software market,” continued Harrison. “Our pipeline for new business opportunities with new and existing customers remains strong. During the quarter we recognized revenue from leading organizations such as BAE, Compal Electronics, Continental AG, Fresenius Medical Care, Harman Becker, Kuhn, Lenovo, NASA, Samsung, and the United States Navy.”

James Heppelmann, president and chief operating officer added, “Our continued revenue momentum in the PLM market is further bolstered by an additional 2 ‘domino’ account wins during Q3. Since 2009, we have won 15 strategically important 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 the many competitive displacement opportunities we are pursuing, 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 with companies that are looking to replace their existing PLM solution to help improve their competitive position in their own markets.”

“We are very optimistic about the long-term opportunity for PTC and are committed to achieving our goal of a 20% non-GAAP EPS CAGR over the next 5 years,” continued Heppelmann. “Based on the market momentum we are seeing, the strength of our pipeline and our increased sales capacity, we continue to be excited about our FY’11 growth opportunity. We will provide formal FY’11 guidance when we issue our Q4 results in October.”

Neil Moses, chief financial officer, commented, “In addition to strong license revenue performance in Q3, our maintenance and services revenue were essentially flat on a year-over-year basis, indicating that the impact of the soft license sales in 2009 is bottoming. We also saw modest license growth in both our CAD and SMB businesses, which we view as a sign of recovery in those markets. Our balance sheet remains solid with $219 million of cash. During Q3 we repurchased $15 million worth of our stock and repaid the remaining outstanding balance on our revolving credit facility.”

Outlook Commentary

“Looking forward to the remainder of FY’10, our Q3 results give us increased confidence in our ability to meet our full-year revenue target of $1 billion and non-GAAP EPS target of $1.00,” continued Moses. “We have raised our currency assumption from $1.20 USD/EURO to $1.25 USD/EURO, which positively impacts revenue by approximately $3 million and negatively impacts expense by approximately $1 million for Q4’10. We are maintaining our full year license revenue growth expectations of 35% to 40% year over year, with our combined maintenance and services businesses expected to be down modestly on a year-over-year basis.”

“We are maintaining our non-GAAP operating margin target of 16%,” continued Moses, “as we intend to continue to invest in our business to leverage our technology leadership position and capitalize on our long-term growth opportunity.” For FY’10 the GAAP operating margin target is 7.5% and the GAAP EPS target is $0.50.

The FY’10 targets assume a non-GAAP tax rate of 25%, a GAAP tax rate of 16% and 120 million diluted shares outstanding. The FY’10 non-GAAP guidance excludes approximately $49 million of stock-based compensation expense, $34 million of acquisition-related intangible asset amortization and $27 million of related income tax effects.

“For Q4 we are initiating guidance of $255 to $265 million in revenue with non-GAAP EPS of $0.30 to $0.32,” Moses added. “We are expecting approximately 20% year-over-year growth in our license revenue in Q4, with our combined services and maintenance businesses essentially flat resulting in 5% year-over-year growth in total revenue.” The Q4 GAAP EPS target is $0.20 – $0.22.

The Q4 guidance assumes a non-GAAP tax rate of 25%, a GAAP tax rate of 17% and 120 million diluted shares outstanding. The Q4 non-GAAP guidance excludes approximately $11 million of stock-based compensation expense, $8 million of acquisition-related intangible asset amortization expense and $6 million of related income tax effects.

Q3 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 Q3 Conference Call and Webcast

When: Wednesday, July 28th, 2010 at 8:30 am (ET)

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 (CT) on August 2, 2010 at 1-866-515-1617 or 203-369-2026. To access the replay via webcast, please visit www.ptc.com/for/investors.htm

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