PTC Announces Strong Q1 Results, Increases FY’12 and Long-Term Targets

Important Information About Non-GAAP References

PTC provides non-GAAP supplemental information to its financial results. Non-GAAP revenue, operating expenses, margin and EPS exclude the effect of purchase accounting on the fair value of the acquired deferred maintenance balance of MKS Inc., stock-based compensation expense, amortization of acquired intangible assets, acquisition-related expenses, restructuring charges, certain foreign currency transaction losses, 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 externally, 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 2012 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 that strategic customer wins may not generate the revenue growth or cost efficiencies we expect, the possibility that resource constraints could adversely affect our revenue, and the possibility that our strategic investments, and organizational realignment and restructuring may not generate the revenue growth or operating margin improvements we expect. 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 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 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.

         
 
PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
   
 
Three Months Ended
December 31, January 1,
  2011     2011  
 
Revenue:
License $ 89,088 $ 75,473
Service   229,188     191,079  
Total revenue   318,276     266,552  
 
Costs and expenses:
Cost of license revenue (1) 7,659 5,954
Cost of service revenue (1) 90,560 80,107
Sales and marketing (1) 97,778 84,521
Research and development (1) 54,993 51,522
General and administrative (1) 29,572 23,484
Amortization of acquired intangible assets   5,209     3,854  
Total costs and expenses   285,771     249,442  
 
Operating income 32,505 17,110
Other expense, net   (2,643 )   (1,886 )
Income before income taxes 29,862 15,224
Provision for income taxes   7,739     1,964  
Net income $ 22,123   $ 13,260  
 
Earnings per share:
Basic $ 0.19 $ 0.11
Weighted average shares outstanding 117,715 116,827
 
Diluted

$

0.18

$ 0.11
Weighted average shares outstanding 120,576 121,150
 
 
 

(1)

The amounts in the tables above include stock-based compensation as follows:
 
 
Three Months Ended
December 31, January 1,
  2011     2011  
Cost of license revenue $ 5 $ 3
Cost of service revenue 2,513 2,137
Sales and marketing 3,728 2,429
Research and development 2,549 2,393
General and administrative   4,587     4,065  
Total stock-based compensation $ 13,382   $ 11,027  
 
 
PARAMETRIC TECHNOLOGY CORPORATION
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (UNAUDITED)
(in thousands, except per share data)
               
Three Months Ended
December 31, January 1,
  2011     2011  
 
GAAP revenue $ 318,276 $ 266,552
Fair value of acquired MKS deferred maintenance
revenue   1,522     -  
Non-GAAP revenue $ 319,798   $ 266,552  
 
GAAP operating income $ 32,505 $ 17,110
Fair value of acquired MKS deferred maintenance
revenue 1,522 -
Stock-based compensation 13,382 11,027
Amortization of acquired intangible assets
included in cost of license revenue 4,103 3,363
Amortization of acquired intangible assets 5,209 3,854
Acquisition-related charges included in
general and administrative expenses   2,068     -  
Non-GAAP operating income (2) $ 58,789   $ 35,354  
 
GAAP net income $ 22,123 $ 13,260
Fair value of acquired MKS deferred maintenance
revenue 1,522 -
Stock-based compensation 13,382 11,027
Amortization of acquired intangible assets
included in cost of license revenue 4,103 3,363
Amortization of acquired intangible assets 5,209 3,854
Acquisition-related charges included in
general and administrative expenses 2,068 -
Non-operating foreign currency transaction loss (3) 761 722
Income tax adjustments (4)   (6,678 )   (5,810 )
Non-GAAP net income $ 42,490   $ 26,416  
 
GAAP diluted earnings per share $ 0.18 $ 0.11
Stock-based compensation 0.11 0.09
Income tax adjustments (0.06 ) (0.05 )
Acquisition-related charge 0.02 -
All other items identified above   0.10     0.07  
Non-GAAP diluted earnings per share $ 0.35   $ 0.22  
 
(2) Operating margin impact of non-GAAP adjustments:
Three Months Ended
December 31, January 1,
  2011     2011  

GAAP operating margin

10.2 % 6.4 %
Fair value of deferred maintenance revenue 0.5 % 0.0 %
Stock-based compensation 4.2 % 4.2 %
Amortization of acquired intangibles 2.9 % 2.7 %
Acquisition-related charges   0.6 %   0.0 %
Non-GAAP operating margin   18.4 %   13.3 %
 
(3) In the first quarter of 2012 we recorded $0.8 million of foreign currency transaction losses related to MKS legal entity mergers completed during the quarter. In the first quarter of 2011 we recorded $0.7 million of foreign currency losses related to a previously announced litigation settlement in Japan.
 
(4) Reflects the tax effects of non-GAAP adjustments for the first quarter of 2012 and 2011, which are calculated by applying the applicable tax rate by jurisdiction to the non-GAAP adjustments listed above, as well as a one-time non-cash charge of $1.4 million related to the impact from a reduction in the statutory tax rate in Japan on deferred tax assets from a litigation settlement.
 
 
PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
           
 
December 31, September 30,
2011 2011
 
ASSETS
 
Cash and cash equivalents $ 187,351 $ 167,878
Accounts receivable, net 221,436 230,220
Property and equipment, net 62,156 62,569
Goodwill and acquired intangible assets, net 822,070 835,411
Other assets 320,372 333,604
   
Total assets $ 1,613,385 $ 1,629,682
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Deferred revenue $ 283,297 $ 294,324
Borrowings under revolving credit facility 200,000 200,000
Other liabilities 282,359 312,668
Stockholders' equity 847,729 822,690
   
Total liabilities and stockholders' equity $ 1,613,385 $ 1,629,682
 
 
PARAMETRIC TECHNOLOGY CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
           
 
 
Three Months Ended
December 31, January 1,
  2011     2011  
 
Cash flows from operating activities:
Net income $ 22,123 $ 13,260
Stock-based compensation 13,382 11,027
Depreciation and amortization 17,026 14,069
Accounts receivable 13,295 (958 )
Accounts payable and accruals (5) (32,937 ) (29,233 )
Deferred revenue (2,075 ) (7,425 )
Litigation settlement - (52,129 )
Other   5,671     3,351  
Net cash provided (used) by operating activities 36,485 (48,038 )
 
Capital expenditures (7,570 ) (5,412 )
Acquisitions of businesses, net of cash acquired (880 ) -
Proceeds from issuance of common stock 7,196 12,232
Payments of withholding taxes in connection with
vesting of stock-based awards (12,661 ) (17,168 )
Other investing and financing activities 150 262
Foreign exchange impact on cash   (3,247 )   786  
 
Net change in cash and cash equivalents 19,473 (57,338 )
Cash and cash equivalents, beginning of period   167,878     240,253  
Cash and cash equivalents, end of period $ 187,351   $ 182,915  
 
 
(5) Includes accounts payable, accrued expenses, and accrued compensation and benefits

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