PTC Inc.
Oct 27, 2009

PTC Announces Q4 and FY'09 Results

Issues Q1 FY’10 Guidance and FY’10 Targets

NEEDHAM, Mass.--(BUSINESS WIRE)--Oct. 27, 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

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.

Forward-Looking Statements

Statements in this press release that are not historic facts, including statements about our fiscal 2010 and other future financial expectations, anticipated tax rates, the expected impact of our planned strategic investments on our future success, the stability of our maintenance and services businesses, and the long-term prospects for PTC 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 our customers may not resume purchases of our solutions when we expect or that they may further reduce, defer or forego investment in our solutions in the current economic climate, the possibility that our customers may not renew maintenance or enter into services engagements at historic rates, the possibility that strategic customer wins may not generate the revenue we expect, the possibility that our strategic investments may not have the effects we expect, the possibility that we will experience a shortfall in revenue that causes us to decrease or eliminate planned strategic investments in our business, the possibility that our efforts to reduce our operating expenses may not have the effects we expect and could harm our operations, the possibility that we may be unable to attain or maintain a technology leadership position or that any such leadership position may not generate the revenue we expect, and the possibility that we may be unable to draw from our revolving credit facility when or to the extent we decide to do so. 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 most recent Quarterly Reports on Form 10-Q and Annual Report on Form 10-K.

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 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.

(continues)

PARAMETRIC TECHNOLOGY CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
           
Three Months Ended Year Ended
September 30, September 30, September 30, September 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
September 30, September 30, September 30, September 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
September 30, September 30, September 30, September 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)
   
 
September 30, September 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
September 30, September 30, September 30, September 30,
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.

Source: PTC

PTC
Kristian P. Talvitie, 781-370-6151
ktalvitie@ptc.com