PTC Announces Fiscal 2008 Second Quarter Results

Issues Q3 Guidance and Re-Affirms Full Fiscal Year Targets

NEEDHAM, Mass, (PresseBox) - Highlights

- Q2 non-GAAP Results: Revenue of $259.5 million and EPS of $0.30
- Q2 GAAP Results: Revenue of $257.8 million and EPS of $0.16
- Q3 non-GAAP Guidance: Revenue of $260 to $270 million with EPS of $0.28 to $0.32
- Q3 GAAP Guidance: Revenue of $259 to $269 million with EPS of $0.14 to $0.18
- Fiscal Year 2008 non-GAAP Guidance: Revenue of $1,060 million with 22% operating margin
- Fiscal Year 2008 GAAP Guidance: Revenue of $1,055 million with 13% operating margin

Q2 Results

C. Richard Harrison, president and chief executive officer, commented, "We achieved 14% year-over-year non-GAAP revenue growth in the second quarter reflecting revenue contribution from the CoCreate Software business, which we acquired on November 30, 2007, strong continued license revenue growth in Europe, services and maintenance revenue growth in all geographies, as well as a favorable currency impact. As expected, the softness in license sales in North America continued." GAAP year-over-year revenue growth for the second fiscal quarter was 13%. Our non-GAAP revenue excludes the effect of purchase accounting on the acquired deferred maintenance revenue balance of CoCreate of approximately $1.7 million.

"We continue to see strong interest in our offerings," continued Harrison, "particularly for our Windchill product, which is the only CAD-platform agnostic PLM product on the market today that is built on an integral architecture. In the second quarter, PTC received orders from leading organizations, including Airbus S.A.S., Hitachi High-Technologies Corporation, BAE Systems, Liebherr, Huawei Technologies Company Limited, VDO Automotive and Volkswagen. Importantly, there were 16 customers from which we recognized more than $1 million of license and services revenue in the second quarter. This is up from 12 customers last quarter and comparable to 16 in the same period last year. We recognized $37.6 million of license and services revenue from these customers in Q2, compared with $32.1 million last quarter and $35.6 million in Q2 of last year."

Neil Moses, chief financial officer, commented, "We delivered 21.0% non-GAAP operating margin in the second quarter, a 630 basis point improvement from the same period last year. The increase was driven primarily by the benefits of our globalization strategy, the continued evolution of our distribution model, improvements to our services business model, and the immediate non-GAAP operating margin accretion provided by CoCreate. Our year-to-date non-GAAP operating margin of 19.6% is up 480 basis points over the first half of fiscal 2007." GAAP operating margin for Q2 of 2008 and the first half of fiscal 2008 was 12.0% and 9.2%, respectively. The Company s non-GAAP tax rate in the second quarter of 2008 was 34% and its GAAP tax rate was 38.6%.

Moses added, "Cash flow from operations was $107 million for the second quarter. We used $52 million in repayment of amounts borrowed under our revolving credit facility to finance the CoCreate acquisition, leaving a balance of $164.4 million as of the end of the second quarter. Additionally, we used $22 million of cash during the quarter to repurchase our common shares under our current $40 million authorization. We have $8 million remaining under that authorization. Cash and cash equivalents were $259 million at the end of the second quarter of 2008."

Q3 Outlook

"Looking forward to Q3, we are currently expecting non-GAAP revenue to be between $260 million and $270 million," said Harrison. "Non-GAAP earnings per diluted share are expected to be between $0.28 and $0.32; we are expecting a slight sequential increase in sales and marketing expense in the third quarter."

PTC expects GAAP third quarter revenue between $259 million and $269 million, and GAAP earnings per diluted share between $0.14 and $0.18. The Q3 guidance assumes a non-GAAP tax rate of 35% and GAAP tax rate of 37.5%.

The non-GAAP revenue guidance for the third quarter excludes the effect of purchase accounting on the acquired deferred maintenance revenue balance of CoCreate of approximately $1 million. In addition, the non-GAAP earnings guidance excludes approximately $11 million of stock-based compensation expense, $9 million of acquisition-related amortization expense and $2 million of restructuring expenses related to our continued globalization program.

FY08 Outlook

For the fiscal year ending September 30, 2008, PTC currently expects non-GAAP revenue to be approximately $1,060 million with non-GAAP earnings per diluted share at the high-end of its previously announced range of $1.17 and $1.27. PTC expects GAAP revenue to be approximately $1,055 million with GAAP earnings per diluted share in the range of $0.66 and $0.77 for the fiscal year. The full fiscal year guidance assumes a non-GAAP tax rate of 35% and GAAP tax rate of 37.5%.

Harrison concluded, "While we remain mindful of the potential impact of a slowing economy in 2008, we are confident in our ability to achieve our fiscal 2008 revenue and earnings targets. Approximately half of our expected non-GAAP revenue growth for the year of 13% is expected to come from the CoCreate business. The remaining half of the expected growth implies 6% year-over-year organic growth. This growth is consistent with our full year target, which anticipated a softening US economy. We believe this expected growth rate is very achievable given the strong growth we are achieving outside of the US, and given the strength of services and maintenance businesses."

The non-GAAP revenue guidance for the full fiscal year excludes the effect of purchase accounting on the acquired deferred maintenance revenue balance of CoCreate of approximately $5 million. In addition, the non-GAAP earnings guidance excludes approximately $44 million stock-based compensation expense, $32 million of acquisition-related amortization expense, $16 million of restructuring expenses primarily related to our continued globalization program, and $2 million of in-process research and development expense related to acquisitions completed in the first quarter of 2008.

PTC

PTC (Nasdaq: PMTC) provides leading product lifecycle management (PLM), content management and dynamic publishing solutions to more than 50,000 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 Midcap 400 and Russell 2000 indices. For more information on PTC, please visit http://www.ptc.com.

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