Outlook Commentary

Glidden continued, “Looking to the full year FY’12, we are targeting non-GAAP revenue growth of 12% to 14%, despite an approximate $25 million negative impact due to currency changes. We expect MKS and 4CS to contribute approximately $90 to $100 million in revenue for the full year, including $3 million in non-GAAP revenue. We are expecting license revenue growth of approximately 17%, non-GAAP maintenance revenue growth of approximately 10% and services revenue growth of approximately 14%. Note that on a constant currency basis our expectation for services growth has increased by approximately 200 basis points due to continued momentum of our PLM solutions and demand for associated services. We are anticipating services net margins will increase significantly to approximately 9% for the year, and we are making good progress expanding our services partner program. Our new FY’12 non-GAAP EPS target of $1.58 to $1.62 is an increase of $0.10 relative to our previous guidance, despite the negative impact of currency movements, reflecting our strong Q1 results, the positive impact of the restructuring on the year and our on-going focus on cost efficiency. We expect the restructuring action to benefit operating expenses by approximately $5 million per quarter beginning in Q3’12. We expect MKS and 4CS to be slightly accretive to FY’12 non-GAAP EPS.” For FY’12, the GAAP EPS target is $0.93 to $0.97.

The FY’12 targets assume a non-GAAP tax rate of 25%, a GAAP tax rate of 21% and 122 million diluted shares outstanding. The FY’12 non-GAAP guidance excludes approximately $20 million in restructuring charges, $3 million for the effect of purchase accounting on acquired MKS deferred maintenance revenue, $51 million of stock-based compensation expense, $36 million of acquisition-related intangible asset amortization, $1 million of other expense, any acquisition-related expenses, and their related income tax effects.

“Based on the market momentum we are seeing, the strength of our pipeline, and our increasing sales capacity, we continue to be excited about our long-term growth opportunity,” said Heppelmann. “The confidence in our long-term opportunity is supported by the 24 large deals (license + services revenue of more than $1 million) we recognized in Q1’12. We believe this is an indicator of the strength of our pipeline for business opportunities with new and existing customers. During the quarter we recognized revenue from leading organizations such as Bell Helicopter, Continental, Danfoss, Nilfisk Advance, Samsung and Schaeffler Technologies.”

Glidden added, “While we acknowledge that there continues to be uncertainty regarding the strength of the global economy, our commitment to operating margin expansion is a cornerstone of our financial strategy, which is clearly reflected in our margin performance in Q1’12 and increased outlook for FY’12 and beyond. For Q2, we are providing guidance of $305 to $320 million in non-GAAP revenue, which includes approximately non-GAAP $22 million in revenue from the MKS and 4CS businesses, including $1 million in non-GAAP revenue, and a $6 to $8 million negative impact due to currency effects. We are expecting approximately $80 to $95 million in license revenue in Q2, services revenue growth of approximately 19%, and non-GAAP maintenance revenue growth of approximately 14%, resulting in approximately 13% to 19% year-over-year growth in total non-GAAP revenue. We are expecting non-GAAP EPS of $0.32 to $0.36, which at the mid-point is an increase of 31% from $0.26 non-GAAP EPS in Q2’11, reflecting our commitment to driving operating leverage in our model.” For Q2, the GAAP revenue target is $304 to $319 million and the GAAP EPS target is $0.06 to $0.11, including a restructuring charge of approximately $20 million.

The Q2 guidance assumes a non-GAAP tax rate of 25%, a GAAP tax rate of 21% and 122 million diluted shares outstanding. The Q2 non-GAAP guidance excludes $20 million in restructuring charges, $1 million for the effect of purchase accounting on acquired MKS deferred maintenance revenue, $13 million of stock-based compensation expense, $9 million of acquisition-related intangible asset amortization expense, any acquisition-related expenses, and their related income tax effects.

Q1 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.

FY’12 Investor Day

Management will host its FY’12 Investor Day on Tuesday, February 7, 2012 from 9:00am to 4:00pm (ET). This event will be held at the InterContinental Hotel New York Times Square.