Financial Good Times Roll For PTC With Increasing Contributions From IoT

Most large PLM companies deal with three groups of people that are necessary for survival – employees, customers, and investors. Every company regards and treats the three groups differently, but most of the successful ones acknowledge the importance of all three – although some companies are better at it than others and some companies regard one or more of the groups as necessary evils.

Each of the groups gets the information it needs to make decisions from different sources, such as press releases, news feeds, whitepapers, eBooks, financial reports, and so on. Financial reports for tech companies are especially interesting not only because of what they say, but what they might imply. And, while some companies try to report “alternative facts,” financial figures don’t lie, and some things are obvious, but there are always numbers subject to speculative interpretation.

That brings me to PTC’s most recent financial report that was made public last week. There were some surprises, some good, some not so good, but in many ways reinforced and reflected the direction of the company, namely IoT. Admittedly, IoT was not the biggest source of revenue for PTC, but it’t clear that it is increasingly important to the health and wealth of the company.

Interestingly, for a PLM company whose fortunes, until relatively recently, have been made largely on “solutions,” traditional software (Creo and Windchill, for example) and support were a bit off, but were largely made up for by IoT offerings. In fact, PTC now reports software as two entities non-IoT solutions and IoT.

In a call with financial analysts, PTC’s President and CEO, Jim Heppelmann, said “Our Q1 results represent a very strong start to FY 2017 and continue the momentum we built over the last year. In Q1, we executed very well across our key strategic and operational objectives.”

“Bookings of $90 million were $10 million or 13% above the high end of the Q1 guidance range we provided last October. We had particularly strong IoT results, but also solid execution in our solutions business, as well. On the subscription front, the 65% subscription mix for Q1 was well above our guidance of 55%. Both bookings and mix benefited from an IoT subscription megadeal (business that exceeds $5 million), but even without this deal bookings and mix would perform well compared to their guidance. All-in-all this was a strong start to the year. To summarize our progress this past quarter around the three key initiatives that we focus how to maximize long-term shareholder value. First to increase our topline growth, second to continue our margin expansion, and third to convert to a subscription business model.”

“In IoT, PTC had a record bookings quarter. Expansions accounted for over half of its IoT bookings. I think this clearly demonstrates the value that customers are deriving from IoT initiatives even though these customers are generally still in their early days of their IoT journeys. It also provides a quantitative basis for the numerous industry analyst reports and awards that consistently positioned PTC as a strong leader in the IoT software platform market.”

“To sum up on the IoT front, we believe the clear leadership and market momentum we have established were once again validated by our very strong Q1 performance and we look forward to providing further insight later this quarter.”

IoT Contributes Big Time To PTC’s 2016 Success

As Heppelmann stated, PTC ended the 2016 calendar year as its most successful year yet in the Internet of Things (IoT) space. PTC expanded its year-over-year IoT bookings, added new customers and partners to its IoT ecosystem, enhanced its IoT technology portfolio, garnered industry recognition and validation, and substantially grew its IoT academic programs. PTC’s IoT strategy really began in 2013 with the acquisition of ThingWorx, and, since that time, has developed several robust IoT offerings.

“When we embarked on our IoT journey, we didn’t set out to be a casual participant in this space. Instead, from day one, we committed ourselves to becoming the leading IoT platform company for the industrial market,” said Jim Heppelmann, president and CEO, PTC. “2016 was a banner year for PTC, as we further proved that our vision and offerings resonate with buyers around the world. As we enter 2017, many of the world’s largest, most successful companies are eager to work with us on new IoT projects.”

PTC’s IoT business grew in calendar 2016, with total year-over-year bookings growth of 115%, including the contributions from Kepware and Vuforia, and organic bookings growth of 53%. PTC’s IoT business concluded calendar 2016 with revenue of approximately $100 million.

PTC continued to add to its IoT customer base in 2016, now more than 1,200 companies. Realizing that a vast ecosystem is needed to win with IoT, PTC has established a network of more than 250 partners that promote the company’s strategy and embrace its technology.

Fundamental to PTC’s growth was the selection of the ThingWorx platform by customers and partners of all sizes and specialties, including:

• GE Digital – PTC and GE Digital furthered their strategic relationship, with the aim to better optimize the combination of the ThingWorx and Predix platforms with a “ThingWorx for Predix” solution for the industrial space, as demonstrated at GE’s Minds + Machines 2016.
• Vodafone – Vodafone Group selected the ThingWorx platform in order to build additional Vodafone IoT applications that it can extend to its global footprint of operating companies.
• Hewlett Packard Enterprise (HPE) – PTC and HPE are collaborating to develop new IoT solutions for industrial use cases. PTC’s ThingWorx software and HPE’s Edgeline Converged Edge System and the HPE Aruba ClearPass network access and security policy software were demonstrated together at HPE Discover 2016.
• VMware – VMware joined the PTC ThingWorx Ready partner program, with a goal of pairing the ThingWorx platform with its own IoT solutions to create new offerings.

Additionally, as part of its expanding partner network, PTC continued to focus on working with the world’s leading systems integrators and professional services companies, which can be a valuable channel for extending PTC’s ThingWorx platform to a wider network of customers. Approximately 100 systems integrators are now part of the PTC Partner Network, including Cognizant, Deloitte, Kalypso, INFOSYS, ITC Infotech, and Tech Mahindra. In 2016, systems integrators developed new IoT solutions based on ThingWorx, including solutions for smart manufacturing, fleet management, smart energy management, and connected care.

Overall, PTC ended its last fiscal year and began its new one on relatively positive notes. For the next quarter, the company is expecting revenue in the $280-$285 million range. For this fiscal year, revenues are forecast to be in the $1.17-$1.18 billion range – an increase of around 3%. This is not bad at all when considering the slow revenue growth the company has endured in recent years. Although relatively modest at this point, PTC’s future revenue compass points very strongly toward IoT, which puts the company in a good position going forward.

Editor’s Note: In just a little over a week from now (February 5-8, 2017), we’ll be in Los Angeles as a Media Sponsor for SOLIDWORKS World 2017 at the Los Angeles Convention Center. We’re in the process of booking video interviews for the conference, and if you’re interested in conducting a video interview, contact Sanjay Gangal at sanjay.gangal@MCADCafe.Com. When edited, the video interviews are 4-7 minutes in length and are a great way to promote you company and its products and services. We hope to see you there at Booth #129!

Tags: CAD software, Creo, Internet of Things, IoT, James Heppelmann, PTC, Windchill

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